Custody Bank of Japan, Ltd.
DISCLOSURE

Note: This translation isprovided for reference purposes
only, and the Japaneseoriginal supercedes it in case ofany discrepancy.

Management Message
We would like to express our sincere appreciation for your continued support.
Our Company was established on July 27, 2020 through the merger of three companies: JTC Holdings, Japan Trustee
Services Bank and Trust & Custody Services Bank. Based on our corporate philosophy of “As Japan’s No. 1 bank specializing
in asset administration, we shall contribute to the sound development of economy and society by playing a role in thedevelopment of asset management businesses and the asset formation of the people of Japan,” all of our executives andemployees shall make further efforts as asset management professionals, aiming to be the best partner to respond to thediverse needs of our clients by responding to the changes in the environment as well proving worthy of the trust of society as afinancial infrastructure by providing high-quality and stable services.
We look forward to your continued support.
July 2021
Yoshikazu Tanaka, President &Representative Director,

Custody Bank of Japan, Ltd.

Logo and Corporate Motto
Our logo and corporate motto represent our Company’s image and resolve to contribute sustainably to the sounddevelopment of the economy and society by ensuring the trust of our customers and financial markets through the provision of
stable services as Japan’s leading asset administration bank offering a wide range of custody services.

● Logo● Corporate Motto

The Reliable Bank

The abbreviation of Japan Custody Bank, “CBJ,” isdesigned in the motif of a golden spiral drawn according
to the golden ratio, which evokes a sense of utmost
stability and beauty in humans.

Becoming the one and only bank that can garner trust in
response to changes in the environment. Bearing in mind
our status as The Reliable Bank, each and every one of
our employees is committed to nurturing Japan CustodyBank.

Corporate Philosophy, Vision and Action Guidelines of Custody Bank of Japan

Corporate Philosophy
As Japan’s No. 1 bank specializing in asset administration, we shallcontribute to the sound development of economy and society by playing
a role in the development of asset management businesses and theasset formation of the people of Japan.

Vision● We respond to the trust of society as a financial infrastructure byproviding high-quality and reliable services● We aim to become the best partner for our customers by meeting theirdiverse needs and managing the changing environment● We shall always be the company that takes pride in being an asset
administration professional in which employees work to their fullpotentials

Action Guidelines● Acknowledging our social responsibility, we shall act with a sense of ownership andintegrity● We shall place our customers first and provide high-quality services that satisfy them
● In compliance with laws, rules and social norms, we shall be sincere and fair in our
conduct● We shall respect and trust each other and create an open and active work environment● We shall tirelessly improve ourselves to acquire advanced expertise and skills

CONTENTS
Corporate Data

02

Corporate Governance04

Action Policy on Fiduciary Duty

05

Review of Business Performance

06

Introduction of Our Company’s Business07

Initiatives for Improving Processing Quality

10

Initiatives for Institutional Reforms, Etc.

11

Risk management system

12Compliance Systems

14

Internal Audits

15

As a Public Institution (Disaster Prevention Measures)

16

Financial Section

18

1

Corporate Data (As of July 1, 2021)

Corporate Profile
Corporate name Custody Bank of Japan, Ltd.
(Custody Bank of Japan, Ltd.)
Establishment
Location

June 20, 2000
■ Head Office8-12, Harumi 1-chome, Chuo-ku, Tokyo, 104-6228
Harumi Island Triton Square Tower Z■ Harumi Branch Office
8-11, Harumi 1-chome, Chuo-ku, Tokyo, 104-6107
Harumi Island Triton Square Tower Y

Capital stock¥51.0 billion

Shareholders

Sumitomo Mitsui Trust Holdings, Inc.
Mizuho Financial Group, Inc.
Resona Bank, Limited
The Dai-ichi Life Insurance Company, Limited
Asahi Mutual Life Insurance Company
Meiji Yasuda Life Insurance Company
Japan Post Insurance Co., Ltd.
Fukoku Mutual Life Insurance Company

Number of
employees

680,000 shares (33.3%)
550,800 shares (27.0%)
340,000 shares (16.7%)
163,200 shares (8.0%)
102,000 shares (5.0%)
91,800 shares (4.5%)
71,400 shares (3.5%)
40,800 shares (2.0%)

1,969 (as of March 31, 2021)*

The number of employees includes personnel seconded
from Mizuho Trust & Banking, Sumitomo Mitsui Trust
Bank, Resona Bank and other companies (590 in
FY2020).

URL

https://www.custody.jp/

Lines of Business Securities administration business, trust and banking
businesses pertaining to asset administration, business
related to Japanese Master Trust
Long-term rating Japan Credit Rating Agency, Ltd. (JCR)

AA+

Rating and Investment Information, Inc. (R&I)

AA-

Moody’s

A1

History
On July 27, 2020, three companies, Japan Trustee Services Bank (surviving company of merger), Trust &Custody Services Bank, and JTC Holdings, merged to form Custody Bank of Japan.
As Japan’s first trust bank specializing in the asset administration business, Japan Trustee Services Bank
was established by Daiwa Bank (currently, Resona Bank) and Sumitomo Trust & Banking (currently,
Sumitomo Mitsui Trust Bank) in June 2000. Capital participation by Mitsui Trust Holdings (currently Sumitomo
Mitsui Trust Holdings) in September 2002.
Trust & Custody Services Bank was established by Mizuho Trust & Banking, The Dai-ichi Life Insurance,
Asahi Mutual Life Insurance, Yasuda Life Insurance (currently Meiji Yasuda Life Insurance) and Fukoku
Mutual Life Insurance in January 2001. Capital participation by Japan Post Insurance in October 2016.
JTC Holdings was established in October 2018 as a bank holding company with the existing shareholders ofJapan Trustee Services Bank and Trust & Custody Services Bank as shareholders.
2Organization Chart
Internal Audit Department
Corporate Planning Department
Human Resources & Corporate
Administration Department
Operations Planning Department
Systems Management
Department

Administration
Division

Risk Management Department
Compliance Department
System Risk Management
Department
Business Promotion Department
Asset Investment Department
Treasury Department

General Meetingof Shareholders

Board of Directors

Board of Corporate
Auditors

President & CEO

Executive Management
Committee

Business Promotion
Division
Treasury Division

Settlement Management
Department
Asset Administration
Department 1
Asset Administration
Department 2
Investment Trust Services
Department 1
Investment Trust Services
Department 2
Investment Trust Services
Department 3
Domestic Business
Department 1
Domestic Business
Department 2
Foreign Business Department 1

Trust Business
Division

Foreign Business Department 2
Corporate Actions Department
Administrative Operations
Department
Life Insurance Company Asset
Custody Department
Management Services
Department 1
Management Services
Department 2
Management Services
Department 3
Collateral Operations
Department
System Development
Department
IT & Business Promotion
Department
EUC Management Department
System Development
Department 1
System Development
Department 2
System Development
Department 3
IT Infrastructure & Technology
Department

System Division

System Operations Department
Trust Consolidation Designing
Department

3

Corporate Governance● Functions, etc. of the Board of Directors and the Executive Management Committee
The Board of Directors makes decisions on important management matters and supervises the directors in the conductof their duties.
The Executive Management Committee (consisting of Executive Directors and Executive Officers with titles) is
responsible for deliberation, as part of the decision-making process in the conduct of business operations, regarding basic
management policies and important individual items. The Committee also works to share information and confirm thestatus of the execution of business activities. Its responsibilities also include reporting important information to the Board of
Directors.
● Functions, etc. of the Board of Corporate Auditors and Corporate Auditors
The Board of Corporate Auditors comprises all the Corporate Auditors, and, as necessary, the Corporate Auditors andthe Board of Corporate Auditors may express their opinions to Directors or the Board of Directors.
In addition, following the audit policies established by the Board of Corporate Auditors, Corporate Auditors may attend
meetings of the Board of Directors and the Executive Management Committee as well as other important meetings,
monitor the conduct of duties by the Directors and Executive Officers, among others, and, as necessary, express theiropinions and make various kinds of suggestions.
In addition to periodically exchanging opinions with the internal audit division (Internal Audit Department), Corporate
Auditors transmit the advice and other points to the internal audit division, as well as exchange information as called for by
the occasion.
The Corporate Auditors are responsible for reviewing important documents, including draft proposals; conducting
various kinds of hearings and fact-finding activities; on-site research; and other activities to gather information for their dayto-day auditing activities. In addition, the Corporate Auditors hold periodic meetings with the Accounting Auditor, receive
reports on the status of auditing activities and the results of audits, and exchange opinions. The Corporate Auditors also
work to preserve the independence of the Accounting Auditor and monitor auditing activities to ensure their proper conduct.
The status of auditing activities and the results of audits are submitted to the Representative Director as an Audit Report.
In periodic meetings with the Representative Director, Corporate Auditors confirm the management policies andexchange opinions on the issues, etc. to be dealt with by the Company.

Officers

4

Chairman

Hiroki Tanaka

Tadaaki Matsuura

Michihiro Masuda

Corporate Auditor(Part-time)
Managing Executive
OfficerManaging Executive
OfficerManaging Executive
OfficerManaging Executive
OfficerManaging Executive
Officer
Executive Officer

President & Representative
Director
Deputy President &Representative Director
Director & Senior Managing
Executive Officer
Director & Senior Managing
Executive Officer
Director & Senior Managing
Executive Officer
Director & Senior Managing
Executive Officer
Director (Part-time)

Yoshikazu Tanaka

Munetaka Saito

Executive Officer

Naoyuki Ohashi

Director (Part-time)

Junichi Maeda

Executive Officer

Tsukasa Kotaka

Corporate Auditor

Tatsuya Tsuboi

Executive Officer

Satoshi Sato

Corporate Auditor

Hiroshi Hirosaka

Executive Officer

Taku Murakawa

Corporate Auditor

Makoto Saito

Executive Officer

Toshiyuki Hioki

Corporate Auditor

Takeshi Watanabe

Executive Officer

Masato Maruyama

Corporate Auditor (Part-time)

Shigenori Ikemura

Executive Officer

Yoshifumi Nishikido

Koji Arita
Koji Shimogama
Hiroshi Takahashi
Hiroyuki Obata

Minoru Mochizuki
Yuji Takei
Takahiro Ishi
Kenji Yoshikawa
Yasuhiro Ueda
Masaaki Tagawa

Action Policy on Fiduciary Duty
I.

PrefaceIn order to fulfill our fiduciary duty under the Vision to “Become the best partner for our customers by meeting their diverse needs
and managing the changing environment,” Custody Bank of Japan has formulated and announced the Fiduciary Duty
Management Policy and Asset administration Action Policy to practice measures that place our customers first in fulfilling the
Fiduciary Duty of overall asset administration business.

II.

Fiduciary Duty Management Policy

Our Company shall establish and comply with the Fiduciary Duty Management Policy in carrying out asset administration
businesses that meet the diverse needs of our customers.

1.

Management System

Concrete action plans shall be formulated and announced for the fulfillment of fiduciary duty, and the compliance divisionperiodically reports on the status of compliance to the Board of Directors and other organizations.

2.

Performance Evaluation

An appropriate performance evaluation system shall be developed to evaluate initiatives that truly meet the needs andrealize the benefits of customers.

3.

Management of Conflict of Interest

Conflict of interest shall be appropriately managed by identifying and classifying transactions that may cause a conflict ofinterest and determining specific management methods. We will also enhance the management on conflict of interest byproviding easy-to-understand information on the examples of conflict of interest.

4.

Penetration of Corporate Culture

We will establish a corporate culture in which all officers and employees, among others, share awareness of and practicecompliance with the fiduciary duty by establishing training and other appropriate motivation frameworks.

III.

Asset administration Action Policy

Our Company shall establish and implement the following asset administration policies.

1.

Strengthening Asset administration Service Framework

We shall appropriately allocate resources such as human resources, administrative infrastructures, and systems in order toimprove reliability and speed of administrative work as a basis of asset administration services.
We shall strive to develop human resources equipped with high-level expertise in legal and tax systems related to securities
and fund settlement necessary for asset administration services.

2.

Sophistication of Administration, Systems, etc. as Financial Infrastructures

To meet the increasingly diverse and sophisticated asset management needs of our clients on a global scale, we shall promoteadvancement of administration and systems.

3.

Initiatives on Improvement of Service Quality and Development of New Services

While appropriately managing trust assets for assurance of clients, we shall constantly strive to develop new services in awide range of fields in the asset administration, with the aim of providing optimal solutions to meet clients’ increasingly diverseand sophisticated needs.
We shall provide appropriate information on asset management fees for services provided to clients.

4.

Enhancement of Information Service to Support Customers’ Investment Activities

In order to contribute to the sophistication of our customers’ investment activities, we shall strive to provide high value-added
information (legislation, taxation, and market information) in a timely manner, based on various reports as well as informationfrom custodians.

IV.

Action Plan

Please visit our Company website.
(https://www.custody.jp/corporate/ﬁduciary/index.html)

5

Review of Business Performance(1) Income Summary
As for profit and loss for the fiscal year under review (FY2020), ordinary income was ¥49,297 million. Key
components included ¥32,757 million of fiduciary fees, and ¥19,945 million of fees and commissions.
Ordinary expenses, on the other hand, amounted to ¥48,062 million. The principal components of ordinary
expenses were ¥45,300 million in general and administrative expenses, and ¥2,735 million in fees andcommissions expenses.
As a result, ordinary profit was ¥1,235 million, with net income of ¥680 million.

(2) Assets, Liabilities, Etc.
Total assets at the end of the fiscal year under review were ¥17,277,835 million. The principal components
were ¥16,763,063 million in cash and due from banks, ¥129,500 million in call loans and ¥75,286 million insecurities.
On the other hand, liabilities amounted to ¥17,158,453 million. The principal components were ¥7,410,882
million in deposits, and ¥9,654,126 million in borrowed money from trust account. Moreover, net assets were
¥119,382 million.
The capital adequacy ratio (Japanese standard) was 34.26%.

(3) Balance of Assets under Custody
At the end of the fiscal year under review, the balance of fiduciary assets and assets under custody based onstanding proxy contracts was ¥720,179,200 million.

(4) Status of Bank Integration and Trust Consolidation
On July 27, 2020, we completed the bank integration through the merger of the three companies, the changeof the trade name, and the opening of Custody Bank of Japan.
On April 1, 2021, the “Trust Consolidation Designing Department” was newly established for the purpose ofpromoting trust consolidation and accelerating examinations thereof.

6

Introduction of Our Company’s Business

Our Company’s businesses are broadly divided into the following categories, with specialized departments inplace providing a wide range of services, to respond quickly and accurately to the increasingly sophisticated anddiverse needs of clients.

● Investment trust fund management
We manage the overall administration related to asset management entrusted by investment trust managementcompanies, and the main operations thereof are as follows.
1. Calculation of net asset value of investment trust
2. Report on the details of the fund to investment trust management companies
3. Procedures for acceptance, cancellation and redemption of funds
4. Closing of accounts
Each year, we conduct a questionnaire survey of investment trust management companies, to reflect clients’opinions in improving our services.

● Management of funds such as pension assets
We manage the overall administration related to asset management entrusted by clients, and the main
operations thereof are as follows.
1. Management of B/S/P/L of funds (per contract)
2. Response to and report on inquiries from clients about the details of the fund, such as daily cash flows
3. Response to institutional changes and administration of fiduciary fees
4. Management of funds (principal)
5. Provision of various services to investment advisory and other asset management companies
6. Preparation of the balance report
7. Preparation of financial statements
8. Preparation of monthly reports and disclosure materials
For disclosure materials, we provide online services for some report forms.

● Domestic securities management
For domestic securities management, we manage the overall administration related to domestic securities, andthe main operations thereof are as follows.
1. Administration of execution related to domestic securities and assets, etc.
2. Administration related to dividends, principal and other rights concerning domestic securities and assets, etc.
3. Administration of execution, margin transaction execution, margins and collateral related to derivatives suchas futures and options
4. Administration related to lending, such as stock lending, bond lending, and repo transactions
We respond to instructions from fund managers via various electronic media (settlement matching system ofJapan Securities Depository Center, Inc., SWIFT, smart bridge, XNET).

● Foreign securities management
For foreign securities management, we manage the processing of overall administration related to foreign
securities, and the main operations thereof are as follows.
1. Execution of physical items related to foreign securities
2. Administration of the preservation of ownership rights over foreign securities
3. Reconciliation of securities and fund balances
We respond to the special features and variability of individual markets by utilizing information provided by global
custodians, etc., and also regularly provide information to customers.

7

Introduction of Our Company’s Business● Domestic and overseas custody services
We manage the overall administration related to asset management entrusted by investment trust managementcompanies, and the main operations thereof are as follows.
1. Custody and agency for trade settlement of securities
2. Proxy receipt of interest and dividends
3. Administration service for preferential benefits
4. Preparation of reports on transactions, balance, etc.
In Japan, we provide services through standing proxies and account management agencies, while overseas, we
provide services through the overseas offices of affiliated companies.

● Life insurance company asset custody service
We manage the overall administration of securities for life insurance companies, including securities accounting,and the main operations thereof are as follows.
1. Settlement and administration of various securities (including derivative transactions) and incidental
transactions in Japan and overseas
2. Accounting such as asset valuation, preparation of accounting entry data and preparation of closing data
3. Preparation of various management and reporting materials
4. Administration service for preferential benefits of General Meeting of Shareholders
5. Automatic conversion of foreign exchange into yen
6. [Securities lending services]
We provide comprehensive outsourcing services for management and administrative functions, including
securities and fund settlement, and securities accounting.

● Middle- and back-office outsourcing services for asset management companies
We are entrusted with the administration related to overall post-trade operations of asset managementcompanies, and the main operations thereof are as follows.
1. Middle office operations (processing, matching and management, etc. of execution)
2. Back office operations (accounting, calculation of net asset value, closing of accounts, etc.)
3. Disclosure operations (preparation of prospectus and investment reports, etc.)
We provide flexible services, covering overall post-trade operations and responding to outsourcing needs for theunits of various investment trust operations.

● Collateral management services for over-the-counter derivatives transactions
The Company is entrusted with a series of collateral management services related to regulations on
over-the-counter derivatives transactions, and the main operations thereof are as follows.
1. Aggregation of valuation of gain or loss by transaction
2. Calculation of the collateral amount and negotiations (disputes) for adjustment of the collateral amount
3. Settlement of collateral securities and funds
We shall actively engage in the development and provision of value-added services in order to mitigate
administrative burdens and reduce system development costs for our customers.

8

● Other operations
For other operations, we are implementing the following:
1. Securities lending
2. Administration related to entrusted assets of securities trusts under management, securities administration
trusts, and account management institution services, etc.
3. Administration related to the undertaking of financial institution services
Based on one of the nation’s largest asset sizes and accumulated know-how and experience, we shall provide
fine-tuned services to meet customer needs.

● Overview of business operations
Our Company’s services areindicated in the box.
Asset managementcompanies

Execution/
instruction

Purchase
order

Purchase order

Securities company

Settlement

Custodians

Execution/
instruction

Stock exchanges

Japan Securities
Depository Center, etc.

Various companies
providing fair value

Fair value/rights/
issuance terms data

Settlement

Domestic securities
management

Fund management(Investment trusts,
pension assets, etc.)

Services of Custody Bank of Japan

Life insurance company
asset custody
Domestic and overseas
custody services

Collateral management forover-the-counter derivatives
transactions
Securities lending, etc.

Various reports
Contract

Funds

S.W.I.F.T., etc.

Settlement

Foreign securities
management

Middle- and back-officeoutsourcing services for
asset managementcompanies

Various information
services
Data provision

Reports

Customers

9

Initiatives for Improving Processing Quality[ Initiatives for Improving Processing Quality ]● Activities to improve processing quality and efficiency
Our Company has established an Operations Planning Department to oversee the overall operations, and is
working to improve the quality and efficiency of its operations.
The Operations Planning Department handles changes in regulatory issues, taxation, and accounting, etc.
and is responsible for the overall processes for offering products and services to customers, investment trust
management companies, and investment advisory companies. The department is also in charge of planning andthe promotion of measures pertaining to improvements in processes, standardization, and efficiency
enhancement. Also, as noted in the next section under Processing Risk Management Activities, this department
is preparing the way for securing the effectiveness of processing risk management activities.

● Processing Risk Management Activities
With the awareness that minimizing processing risk is one of the most-important issues for a company
specializing in asset administration, the Company has prepared its Processing Risk Management Rules, whichcontain basic items for conducting proper and smooth processing operations and for the management ofprocessing risk. Based on these rules, the Company engages in control activities to take preventive measures(in advance) and deal with risks that have emerged (after the fact).
<<Preventive measures>>
To prevent accidents and other incidents, the Company has established processing procedures manuals for
all its processing operations, forbidden non-standard processing, and been thoroughly conducting mutual
checking as standard procedure.
<<Dealing with risks that have emerged>>
In the event of an accident or other incident, CBJ endeavors to accurately assess the situation, report it quickly,
and take action with the top priority placed on the protection of managed assets. CBJ also analyzes the factors
and issues that caused the incident, formulates measures to prevent reoccurrence and confirms theeffectiveness of these measures.

Improving processing
quality

Improving processing
efficiency“Stable and high quality” operations

Department in overall charge of operations =“Operations Planning Dept.”

Operations Planning Department
・ Overall charge of operations (including those related toregulatory matters, taxation, accounting, and providing
products and services to customers, investment trust
management companies and investment advisory
companies)
・ Promotion of processing improvements, standardizationand productivity enhancement
・ Taking preventive (in advance) measures: preparation andupdating of the processing procedures manuals
・ Taking measures after the fact: management of processing
errors10

Other Departments
・ Taking charge of improvements, etc., with
operating units
・ Promotion/implementation of measures
adopted by the Operations Planning
Department

Initiatives for Institutional Reforms, Etc.

[ Initiatives for Institutional Reforms, Etc. ]The securities settlement system plays an important role in Japan’s securities transactions as a core element in theinstitutional base. Our Company, as a leading company in the asset administration business, is preparing actively torespond to Securities Settlement System and Domestic Securities Market Reforms. In addition, other than the
Securities Settlement System, our Company positions responding appropriately to the International Regulations forderivative transactions, and the Extraterritorial Application of Individual Regulations in the United States and Europe,among others, as one of the important issues and has been steadily doing so. We will continue to take appropriate
responses to provide customers with high-quality services.
<Major events since FY2020>
Category

Field

Upcoming EventsContent and CBJ’s Initiatives

Schedule

Corporate bonds(general bonds)

Shortening thesettlement period forcorporate bonds(general bond)

The period for settlements from transactions(contract) to final settlement (delivery) is
shortened, and settlement risk in the market as awhole is reduced. CBJ has already implemented
this system.

July 2020

ETF
establishment
and exchangetransactions

Shortening the period
for ETF establishment,
exchange, andsettlement

The settlement period for ETF establishment andexchange has been shortened based on theestablishment of a market-unified platform for theestablishment and exchange of ETFs and theliquidation of ETFs by the JSCC. CBJ has already
implemented this system.

January 2021

Foreign currency
exchangetransaction

Shift to CLS settlement

Preparations are underway at relevantorganizations for enabling PVP settlements
through CLS banks for foreign currency exchangetransactions by investment funds. CBJ will also
take measures to enable parties such as
customers to use this service on request.

Shift asappropriate

Global securities
transactions

Collateral now required
for transactions suchas TBA transactions

According to the regulations of FINRA in the USA,
American companies are required to collect
collateral when carrying out transactions such as
TBA transactions. CBJ will proceed withappropriate measures.

October 2021

Interest rate
indicator

Suspension of LIBOR
publication

The global interest rate indicator referred to for
products and contracts is scheduled to shift from
LIBOR to risk-free rates. CBJ will proceed withappropriate measures.

December
2021

Securities
Settlement
System Reforms

International
MarketRegulations, etc.

11

Risk management system[ Risk management system ]● Risk management policy
In order to fulfill its public mission as a bank specializing in asset management, the Company has beendeveloping a risk management system as one of its most important management policies to appropriately
manage and control risks and ensure the soundness of its management. Furthermore, we are creating a
corporate culture that emphasizes risk management, and based on the concept of a three-line defense, we havebuilt a risk management framework for business execution to ensure the effectiveness and appropriateness of
our risk management system.

● Fostering a risk culture
A sound risk culture is nurtured by all officers and employees involved in our Company’s business, to have a
deep insight into risk and a strong sense of ethics regarding the execution of their duties, which supports theframework of the risk management system and leads to the maintenance of customer trust and the sustainableimprovement of corporate value.
Through the formulation and dissemination of action guidelines on risk in line with our operations and theapplication of the guidelines by individual employees in their daily work, our Company strives to foster a soundrisk culture throughout the Company by instilling a risk mindset as employees of a bank specializing in asset
management.

● Risk governance
Our Company ensures the effectiveness and appropriateness of our risk management system through athree-line defense: autonomous control by each business unit (First line), risk management by the risk
management unit (Second line), and internal audits by the independent internal audit unit (Third line).
[Frist line] Each business unit: Autonomous control function
・ While carrying out daily operations in accordance with regulations and rules, each business unit has primary responsibility as theowner of risks associated with business execution, and autonomously conducts control activities such as identifying, assessing, andcontrolling risks.
[Second line] Risk management unit: Risk management function
・ The Risk Management Department and the risk management unit monitor the autonomous control activities carried out by the firstline, and establish a risk management process by identifying and assessing the risks for our Company.
[Third line] Internal Audit Department: Internal audit function
・ Independent from individual business execution divisions, it verifies their activities, among others.

12

● [Risk management system]
Recognizing that risk management is one of the most important management issues as a bank specializing in asset
management, our Company is working to implement appropriate risk management across the entire company and to
improve our risk management system by formulating a basic framework for risk management, with the Board of
Directors defining the various risks to be managed, creating the basic framework for risk management, and in addition,
establishing the Risk Management Deliberation Committee as a cross-organizational body chaired by the officer incharge of risk management.
Specifically, as shown in the table and figure below, we have classified risks incurred in the course of executing
business into categories such as “Operational risk,” “Liquidity risk,” “Credit risk” and “Market risk” and established a risk
management unit for each category to manage risks according to their characteristics, while establishing the Risk
Management Department as a department supervising unified management to manage risks in an integrated manner.
As part of the integrated risk management, we gain an understanding of the aggregate level of risk in each category
through qualitative and quantitative assessments, and manage the adequacy of capital by comparing such levels withthe strength of our business.
In light of the risk profile specific to asset management operations, our Company recognizes operational risk andliquidity risk as major risks. Accordingly, we engage in a variety of risk management activities, with a basic policy of
preventing operational risk and minimizing its impact when it materializes, as well as a basic policy of not taking on
liquidity risk to the extent possible while developing a system for dealing with funding crises.
<Content of Risk Category>
Risk to be managed and its content

Management method

Operational
risk

Risk of incurring losses due to reasons such as defects
in the operational process, errors by officers andemployees, system malfunction, or external events
such as rumors.

・ Broad management by classification into individual risks
concerning administration, information security, systems, legal
affairs and compliance, human resources, tangible assets, andreputation.
・ Developing a risk assessment system through Control
Self-assessment (CSA)

Liquidity
risk

Risk of incurring losses due to reasons such as an
inability to secure necessary funds, funding problems,or the need to procure high interest rate funds.

・ Funding mismatch limit management and stress testing・ Establishing a crisis management system for a funding crisis

Credit risk

Risk of incurring losses due to a decline in or complete
loss of asset value as a result of a deterioration in thefinancial condition of counterparties

・ Credit management based on the credit rating system
・ Setting credit limits and other limits for each counterparty

Market risk

Risk of incurring losses due to fluctuations in asset
value or income as a result of changes in the prices ofmarket transactions

・ Identifying the degree of risk using interest rate sensitivity
・ Setting limits on the degree of risk and the amount of loss limits
as well as stress testing<Risk Management Structure>
Board of Directors
President - Executive Management Committee
Officer in charge of risk management- Risk Management Deliberation Committee(*)(*)

An organization that deliberates
and coordinates risk management
across the entire company.

Audit

Internal Audit
Department

Risk
Management
Department

Market risk

Credit risk

Second line

Liquidity risk

Human
Resources &Corporate
Administration
Department

Reputationalrisk

Tangible asset
risk

System Risk
Management ComplianceDepartment Department

Personnel
risk

Legal &
compliance risk

First line

System risk

Monitoring

Operations
Planning
Department

Information
security risk

Administrati
ve risk

Each business unit

Operational risk

Third line

13
Audit

Compliance Systems[ Compliance Systems ]As Japan’s No. 1 bank specializing in asset administration, we shall contribute to the sound development of
economy and society by playing a role in the development of asset administration business and the asset
formation of the nation. Under this Corporate Philosophy and for its realization, we shall act with integrity andimpartiality in compliance with laws, rules, and social norms as a pillar of our Action Guidelines. For this reason,
our Company positions legal and other kinds of compliance as one of our top priority management issues, in otherwords, compliance with not only laws and regulations, but also social norms in a broad context. Our Company, bydeveloping compliance management system in overall operation, strives to ensure sound and appropriate
management based on self-discipline, and ensure our customers and society have full confidence in us.

● CBJ’s Compliance Structure
The Board of Directors makes decisions on basic compliance matters and oversees the implementation. The
President also oversees compliance at our Company, and the Executive Management Committee deliberates
and reports on compliance matters.
Our Company has designated the Compliance Department as a department supervising compliance matters.
The department develops internal regulations required for the compliance management system, implements
measures and guidance, responds to issues, and improves training and education structures to manage overall
compliance in our Company. The Compliance Department regularly reports progress on compliance matters to
the Board of Directors, etc. and promptly reports when a serious violation of laws and regulations or an eventwith a grave impact on management occurs.
In each department of our Company, the Compliance Head, a post assumed by the general manager, and theCompliance Manager are assigned to secure the effectiveness of compliance in each department and carry out
concrete measures in cooperation with the Compliance Department.

Board of Directors
Executive Management
Committee
Compliance Department

Other Departments

General Manager

Compliance manager

Persons responsible for compliance ineach department

Implementing measures for compliancein cooperation with the ComplianceDepartment● Making All Personnel Aware of Compliance
In principle every year, the Compliance Department formulates a compliance program, and it is a specificaction plan for the achievement of compliance. This compliance program is disseminated across the entire
organization, after obtaining approval of the Board of Directors.
Our Company has also established the Compliance Manual as a practical guide for officers and employees toensure compliance. Formulation and important revision of the Compliance Manual are disseminated across theorganization after approval of the Board of Directors is obtained.

● Compliance Hotline System
Internal and external reporting desks (the Compliance Hotline) are established for officers and employees, etc.
of our Company to report acts of legal violations, or suspected violations within our Company. When a report isreceived, the Compliance Department reports to the officer(Director) in charge of the Compliance Department
and Corporate Auditors and takes appropriate action.

14

Internal Audit● Basic Action Policy
Our Company’s internal audit is a process, independent from the business lines, of verifying the appropriateness andeffectiveness of governance, risk management and controls for the achievement of management goals, objectively andholistically assessing the results, providing findings and recommendations to correct issues, and following up on thestatus of improvements.
Our Company has established the Basic Policy on Internal Audit to ensure sound business, and carries out thefollowing initiatives to verify and assess the appropriateness and effectiveness of the internal control management
system.
1) Establishment of the internal audit division that is independent from the business execution divisions and has asufficient check-and-balance function2) Based on the formulation of an internal audit plan, the internal audit division audits each business execution
division and provides findings and recommendations for improvements.
3) Results of internal audits and the progress of internal audit plans are reported to the Internal Audit Committee andthe Board of Directors in accordance with internal audit rules.

● Organizational structure
The Internal Audit Department has been established as an internal audit division independent of each businessexecution division, covering all units and operations in internal audits.

● Functions and roles
In line with the Basic Policy on Internal Audit, the Internal Audit Department formulates an internal audit plan focusedon material risk items of our Company. The plan is approved by the Board of Directors.
Results of internal audits are reported to the President and Corporate Auditors without delay, and are periodicallyreported to the Internal Audit Committee and the Board of Directors.
Depending on the purpose of internal audits, general audits are conducted to audit matters related to the operations
under the jurisdiction of the units concerned, and theme audits to audit specific themes.

<Internal Audit Structure>
Corporate Auditor
Board of Directors

Internal Audit Committee(Chairperson: President)

Business Execution
Division

Placing planson the agenda,
reporting on
results
Reports

Internal
AuditsInternal Audit
Department

Designated dispute resolution organization
Our Company has concluded contracts with the following designated dispute resolution organizations.
Name of designated dispute
resolution organization

Japanese Bankers Association

Trust Companies Association of Japan

Contact and telephone
numberConsultation Desk, Japanese Bankers
Association
0570-017109 or 03-5252-3772

Trust Consultation Desk
0120-817335 or 03-6206-3988* The Japanese Bankers Association is a designated dispute resolution organization under the Banking Act and the Norinchukin Bank Act.
* The Trust Companies Association of Japan is a designated dispute resolution organization under the Trust Business Act and the Act on Engagementin Trust Business Activities by Financial Institutions.

15

As a Public Institution (Disaster Prevention Measures)

Custody Bank of Japan has established a system for business continuity in the event of a disaster based on its
recognition that it is a public institution in asset administration services.

● Disaster countermeasures
In the event of a disaster or system failure with a significant impact on business operations, we shall strive tominimize the damage through speedy initial response, and secure early and smooth business continuity andrecovery.
A business continuity plan is established by the Business Continuity Management Deliberation Committee
chaired by the President in times of normality, and new issues are addressed through regular drills on disaster
response, etc.

Facilities (Installations and Equipment)
Our Head Office is located in the Harumi Island Triton Square complex and is designed to withstand magnitude 7(Japanese scale) earth tremors, such as the 2011 Great East Japan Earthquake. Further, as a financial institution,
our Company, in line with the standards issued by The Center for Financial Industry Information Systems (FISC),
has installed a dedicated electric power generator to secure a power supply, utilizes telecommunications lines frommultiple carriers to avoid communication breakdowns, and introduced an IC card system to strengthen
crime-prevention measures.
In addition, our systems centers and backup centers have a similarly strong infrastructure, including
anti-earthquake construction, electric power sources, and security facilities.

Backup Systems
CBJ’s offices and system centers have backup facilities in preparation for possible natural disasters or otherdifficulties.
Our Company has established backup offices of the Harumi Head Office as disaster countermeasures in Fuchu
City and Chofu City, and backup centers of system centers in Osaka Prefecture and Saitama Prefecture.
[Normal time]

16

Office environment

System environment

Harumi Head Office

System centers(Fuchu and Chofu)

[When Harumi Head Office is damaged]
If the Harumi Head Office is affected by a disaster, operations will be continued at backup offices in Fuchu andChofu Cities, together with opening temporary counters (delivery counters of securities companies and othercustomers).

Office environment

System environment

Backup offices (Fuchu and Chofu)

Temporary center activated
System centers(Fuchu and Chofu)

When Harumi Head
Office is damaged[When system centers are damaged]
If the system centers (Fuchu and Chofu Cities) are affected by a disaster, the system environment will betransferred and operations continued at the backup centers (Osaka and Saitama Prefectures).

Office environment

System environment

Backup centers(Osaka and Saitama Prefectures)

Harumi Head Office

When system centers(Fuchu and Chofu)

are damaged

17

Financial Section

18■

Key Indicators of Management Condition (FY 2016 to FY 2020) .............. 19■

Balance Sheets......................................................................................... 20■

Statements of Income ............................................................................... 21■

Statements of Changes in Net Assets ...................................................... 22■

Notes to Accounting Items (FY2020) ........................................................ 23■

Confirmation Statement from Management .............................................. 27■

Auditors’ Statement .................................................................................. 27■

Fair Value Information of Securities, etc. .................................................. 28■

Other Asset Situation (Risk-monitored Loans, etc.) .................................. 30■

Asset Classification under the Financial Revitalization Act ....................... 30■

Indicators for Banking Business ................................................................ 31■

Matters concerning Bank Management .................................................... 37■

Trust Assets and Liabilities ....................................................................... 38■

Capital Adequacy Status, etc. ................................................................... 42■

Disclosure of Compensation, etc. ............................................................. 50■

Consolidated Information .......................................................................... 51

Key Indicators of Management Condition

Key Indicators of Management Condition(¥ million)

FY2016
Ordinary income

FY2017FY2018FY2019FY202026,55927,436

29,46730,75649,297

Ordinary profit

576

1,199

555

694

1,235

Net income

390

480

344

506

680

Capital stock

51,00051,00051,00051,00051,0001,020,000
shares1,020,000
shares1,020,000
shares1,020,000
shares2,040,000
sharesTotal number of shares issued
Net assets

59,15659,43559,07659,582

119,382

Total assets

13,201,888

13,835,275

11,040,555

9,946,450

17,277,835

Balance of deposits (including
negotiable certificate deposits)

6,807,134

7,840,589

5,309,477

3,631,072

7,410,882

Loans

49,127

184,058

167,951

97,13631,141

Securities

45,225337

334

30,34975,286

Dividend payout ratio (*1)

40.44%

40.31%――

19.79%

Number of employees (*2)

1,016 persons

1,052 persons

1,067 persons

1,135 persons

1,969 persons

Non-consolidated capital adequacy
ratio (Japanese standard) (*3)

33.41%

31.70%

36.54%

34.12%

34.26%

Fiduciary fees

20,243

20,577

21,95623,02432,757――――

310,640

Trust account securities

100,693,580

109,179,760

116,317,170

123,178,561

217,702,529

Total entrusted assets

259,118,905

282,074,441

291,898,563

303,754,597

467,599,890

Trust account loans(*1) The dividend payout ratio for FY2018 does not include dividends from the business merger carried out in September 2018.
(*2) The number of employees includes personnel seconded from Mizuho Trust & Banking, Sumitomo Mitsui Trust Bank, Resona
Bank and other companies (590 in FY2020), and those seconded from Sumitomo Mitsui Trust Bank, Resona Bank and othercompanies (216 in FY2016, 204 in FY2017, 189 in FY2018, and 194 in FY2019).
(*3) The “Non-consolidated capital adequacy ratio (Japanese standard)” is calculated according to the “Standards for banks to judge
their capital adequacy in light of assets they held based on Article 14-2 of the Banking Act” (Financial Services Agency
Notification No. 19 of 2006).
(*4) On July 27, 2020, our Company merged with JTC Holdings and Trust & Custody Services Bank, changing the trade name fromJapan Trustee Services Bank to Custody Bank of Japan. Figures up to FY2019 are those for the pre-merger period (Japan
Trustee Services Bank), and from FY2020 onwards, those for Custody Bank of Japan.
(¥ million)

Former Trust & Custody Services
Bank
FY2016FY2017FY2018FY2019Ordinary income

23,462

23,884

25,11325,498

Ordinary profit

990

857

740

328

Net income

674

507

939

64

Capital stock

50,00050,00050,00050,0001,000,000 shares

Total number of shares issued

1,000,000 shares

1,000,000 shares

1,000,000 shares

Net assets

60,771

61,02459,47959,493

Total assets

11,424,703

13,657,253

6,494,669

5,972,264

Balance of deposits (including
negotiable certificate deposits)

7,699,573

9,875,034

2,274,797

2,407,030

Loans

4,508,796

6,209,728

709,241―

188,945

263,932

295,307

174,817

Securities

20.01%

19.71%――

672 persons

690 persons

697 persons

821 persons

Non-consolidated capital adequacy
ratio(Japanese standard) (*2)

22.03%

22.67%

37.84%

46.01%

Fiduciary fees

11,165

11,425

12,431

13,134――

1,745,329

1,556,509

Dividend payout ratio (*1)
Number of employees

Trust account loans
Trust account securities

84,565,099

81,754,495

85,096,939

83,110,413

Total entrusted assets

146,066,410

143,366,870

143,717,067

139,836,527(*1) The dividend payout ratio for FY2018 does not include dividends from the business merger carried out in September 2018.
(*2) The “Non-consolidated capital adequacy ratio (Japanese standard)” is calculated according to the “Standards for banks to judge
their capital adequacy in light of assets they held based on Article 14-2 of the Banking Act” (Financial Services Agency
Notification No. 19 of 2006).

19

Financial Data

Figures for FY2019 are those of the former Japan Trustee Services Bank.
Balance Sheets(¥ million)

AssetsCash and due from banks
Cash
Due from banks
Call loans
Receivables under resale agreements
Securities
Government bonds
Regional government bonds
Corporate bonds
StocksOther securities
Loans and bills discounted
Loans on deeds
Foreign exchanges
Due from foreign banks (our accounts)
Other assets
Prepaid expenses
Accrued income
Derivatives other than for trading-assets
CCP margin deposits
Other assets
Tangible fixed assets
Buildings
Lease assets
Other tangible fixed assets
Intangible fixed assets
Software
Other intangible fixed assets
Prepaid pension expenses
Deferred tax assets
Total assets
Liabilities and net assets
Deposits
Current deposits
Ordinary deposits
Other deposits
Call money
Due to trust accounts
Other liabilities
Income taxes payable
Accrued expenses
Derivatives other than for trading-assets
Lease obligations
Asset retirement obligations
Other liabilities
Provision for bonus payments
Provision for retirement benefits
Provision for directors’ retirement benefits
Total liabilities
Capital stock
Capital surplus
Legal capital surplus
Other capital surplus
Retained earnings
Legal retained earnings
Other retained earnings
Retained earnings brought forward
Total share- holders’ equity
Valuation difference on available-for-sale securities
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets

20

FY2019FY2020(March 31, 2020)(March 31, 2021)

9,604,194
0
9,604,194
27,00030,64030,34930,015――320
14
97,136
97,136――
126,915
892
8,847―
89,13328,041
2,661
1,172
0
1,489
26,874
26,8695299
377
9,946,450

16,763,063
0
16,763,062
129,500―
75,28630,00935,0239,744
490
18
31,141
31,141
4,909
4,909
217,401
1,119
13,313
91
157,699
45,177
4,449
2,174
26
2,249
50,69650,65145
353
1,034
17,277,835

3,631,072
3,598,319
17,473
15,279―6,187,490
67,176
250
1,564
―
0
153
65,208470655
29,886,868
51,000
―
―
―
8,583
1,094
7,489
7,489
59,583△1△159,582
9,946,450

7,410,882
6,387,257
1,004,901
18,72330,0009,654,126
61,932
753
3,918
30
28
721
56,478606
905―
17,158,453
51,00059,07350,000
9,073
9,263
1,094
8,169
8,169
119,33745
45
119,382
17,277,835

Statements of Income(¥ million)

Ordinary income
Fiduciary fees
Interest income
Interest and dividends on securities
Interest on call loans
Interest on receivables under resale agreements
Interest on due from banks
Other interest received
Fees and commissions
Fees and commissions on domestic and foreign exchanges
Other fees and commissions income
Other operating income
Foreign currency exchange trading profit
Other ordinary income
Gains on sales of stocks, etc.
Other ordinary income
Ordinary expenses
Interest expenses
Interest on deposits
Interest on call money
Interest on borrowings
Other interest expenses
Fees and commissions expenses
Fees and commissions on domestic and foreign exchanges
Other fees and commissions expenses
General and administrative expenses
Other ordinary expenses
Other ordinary expenses
Ordinary profit
Extraordinary profit
Other extraordinary profit
Extraordinary loss
Loss on disposal of fixed assets
Impairment loss
Income before income taxes
Income taxes—current
Income taxes—deferred
Total income taxes
Net income

FY2019FY2020(from April 1, 2019 to March
31, 2020)(from April 1, 2020 to March 31,
2021)

30,75623,024△ 2,247
112△ 39△ 2,221
0
9,902
374
9,527
―
―
76
―
76
30,061
32
0
0
0
32
337
89
247
29,689
1
1
694
―
―
42
42
―
652
148
△2
146
506

49,29732,757△ 4,06425
11△7△ 4,095
1
19,945479
19,465
1
1
657
587
69
48,062
17
0
0
0
16
2,735
141
2,594
45,300
9
9
1,235
11
11
258
45
213
988
521
△ 213
308
680

21

Financial Data

Statements of Changes in Net Assets(¥ million)

FY2019 (from April 1, 2019 to March 31, 2020)

Valuation andtranslation
adjustments

Shareholders’ equity

Capitalstock

Balance at the
beginning of the period
Changes of items
during the period

51,000Retained earnings
Otherretainedearnings
Legal
Total
retained Retained retained
earnings earnings earnings
brought
forward
1,094

Net income
Net changes of items
other thanshareholders’ equity
Total changes of items
during the period
Balance at the end of
the period

Totalshareholders’equity

6,982

8,077

59,077

506

506

506

Valuation
Total
Total netdifference valuation
assetsonandavailable- translation
for-sale adjustmen
securities
ts
△0

△0

59,076

506
△1

△1

△1

―

―

506

506

506

△1

△1

505

51,000

1,094

7,489

8,583

59,583△1△159,582(¥ million)

Capitalstock

Balance at the beginningof the period
Changes of items during
the period
Increase by merger
Net income
Net changes of items
other thanshareholders’ equity
Total changes of items
during the period
Balance at the end of theperiod51,000

FY2020 (from April 1, 2020 to March 31, 2021)
Shareholders’ equity
Capital surplus
Retained earnings
Otherretainedearnings
Legal
Other
Total
Legal
Total
capitalcapitalcapitalretained Retained retained
surplussurplussurplusearnings earnings earnings
brought
forward―――50,0009,073

59,073

Increase by merger

22

8,583

59,583680

680

59,073680

50,0009,073

59,073

―

680

680

59,75351,00050,0009,073

59,073

1,094

8,169

9,263

119,337△1△159,58270

70

59,143

Net income
Net changes of items
other thanshareholders’ equity
Total changes of items
during the period
Balance at the end of
the period

7,489

―

Valuation andtranslation
adjustments
Valuation
Total
difference valuationonandTotal net
available- translation assets
for-sale adjustmen
securities
ts
Balance at the
beginning of the period
Changes of items during
the period

1,094

Total
shareholders’equity

680
△ 23

△ 23

△ 23

47

47

59,80045

45

119,382

Notes to Accounting Items (FY2020)
Amounts less than ¥1 million are rounded down.
Material accounting policies
1. Standards for evaluation of securities and valuation methods used
In principle, as with available-for-sale securities, securities are valued by the market value method based on the market price or other appropriate price at the balance sheet
date (with the sales price calculated by the moving average method). Provided, however, that regarding securities for which it is extremely difficult to determine their fair value, theoriginal purchase prices are employed based on the moving average method. Note that the full amount o f adjustments in the value of available-for-sale securities is accounted
for by adding such amounts directly to net assets.
2. Valuation standards and methods for derivative transactions
Valuation of derivative transactions shall use the market value method.
3. Depreciation methods(1) Tangible fixed assets (excluding leases)
Depreciation of tangible fixed assets is calculated by the declining-balance method, with the exception of buildings (excluding equipment installed in buildings), and facilities
attached to buildings and structures acquired on or after April 1, 2016, which are depreciated by the straight-line method.
Estimated useful lives of major items are as follows:
Buildings: 3 to 50 years
Others: 2 to 20 years(2) Intangible fixed assets (excluding leases)
Intangible fixed assets are amortized by the straight-line method. Software for internal use is amortized over its estimated useful life (mainly 5 years).
(3) Lease assets
Lease assets for which the ownership does not transfer and are included in tangible fixed assets are depreciated using the straight-line method over the estimated useful life.
Note that for those leases that are based on contracts providing for guarantees of residual value the assets are depreciated down to the specified residual value, and all otherassets are depreciated to zero.
4. Standards for translating foreign currency assets and liabilities into yen
Foreign currency assets and liabilities are translated into Japanese yen at the exchange rate prevailing at the balance sheet date.
5. Standards for calculating reserves(1) Provision for bonus payments
To provide for the payment of bonuses, our Company sets aside a reserve for bonuses for employees in the amount of the estimated bonuses attributable to the fiscal year
under review.
(2) Provision for retirement benefits
To provide for the payment of retirement benefits to employees, CBJ sets aside the reserve necessary at the fiscal year-end to cover such benefits, based on estimates of
its retirement benefit obligations and the expected value of pension plan assets. In addition, in calculating retirement benefit liabilities, the expected amount of retirement
benefit payments through the end of the subject fiscal year is allocated to the fiscal year under the benefit formula standard. Please note that the method for amortizing
expenses or recognizing gains arising due to prior service costs and actuarial differences is as follows.
Prior service costs
Amortizing expenses or recognizing gains collectively in the year in which they occur
Actuarial differences
The unrecognized net actuarial difference accrued in each fiscal year is amortized proportionately using the straight-line method over a specified number of years (5 years),
which is within the average remaining years of service in each year when the obligations are incurred, commencing from the next fiscal year of incurrence.
6. Accounting for consumption taxes
National and regional consumption taxes (hereinafter, the “Consumption Taxes”) are accounted for using the net-of-tax method.

Change of the presentation method“Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31, March 31, 2020) has been applied from the financial statements for the fiscal year underreview, and notes concerning significant accounting estimates have been included in the financial statements.

Significant accounting estimates
Items whose amounts are recorded in the financial statements for the fiscal year under review based on accounting estimates and that may have a significant impact on thefinancial statements for the following fiscal year are as follows.
1. Impairment loss on software(1) Amounts recorded in the financial statements for the fiscal year under review
Software¥50,651 million
Impairment loss
¥213 million(2) Information that contributes to an understanding of the content of significant accounting estimates for the identified items
1) Calculation method
The calculation method of impairment loss is described in “Notes to Accounting Items (Statements of Income) 3.”
2) Key assumptions
The key assumptions are the remaining economic lives based on the expected future use of the software, etc.
3) Impact on the financial statements for the following fiscal year
Changes in initial assumptions about important software, such as changes in the expected future use, may have a material impact on the amount of software in thefinancial statements for the following fiscal year.

Notes to Accounting Items(Balance Sheets)
1. The full amount of loans is outstanding to the government of Japan.
2. Assets pledged as collateral are as follows.
Assets pledged as collateral
Loans and bills discounted¥31,141 million
Debt corresponding to collateralized assets
The above is collateral for overdraft transactions with the Bank of Japan, and there is no outstanding balance of correspondi ng liabilities as of the end of fiscal year underreview.
In addition to the above, collateral for exchange settlement and other transactions has been presented in the form of securities amounting to ¥30,009 million.
Other assets include CCP guarantee deposits of ¥39,128 million and guarantee deposits and others of ¥3,530 million.

23

Financial Data

3. Overdraft contracts provide for making loans up to a specified limit, provided there are not violations of the provision of c ontracts, when loan requests are received from
customers. The unexercised balance of loan commitments under these contracts is ¥2,159,800 million, and the remaining contract terms are 1 year or less for the fullamount. Note that, since most of these contracts terminate without requests for overdrafts, the unexercised balance of loan commitmen ts under these contracts will notnecessarily have an effect on the cash flow. Many of these contracts incorporate provisions that allow our Company to reject the loan or reduce the maximum loan
amount accepted if financial conditions change, claims need to be protected, or there are any other reasonable grounds. If necessary, real estate, securities and othercollateral will be required at the time of contract, and even after the contract is concluded, t he business conditions of customers are periodically monitored based on
predetermined internal procedures, and contracts are reviewed and credit protection measures are taken as necessary.
4. Accumulated depreciation of tangible fixed assets: ¥5,493 million
5. The principal amount of trusts with principal-guaranteed features is ¥627,927 million in money trusts.
6. Total monetary claims on affiliates:¥1,932 million

7. Total monetary obligations outstanding to affiliates:¥7,815 million(Statements of Income)1. The negative interest receivables under resale agreements included in interest income are due to the execution of transactions with negative interest rates, and thenegative figure for interest on due from banks is due to the fact that, as a consequence of the application of negative interest rates to Bank of Japan current deposits,
interest on due from banks became negative on a net amount basis.
2. Other extraordinary income is the gain on the extinguishment of tie-in shares.
3. As a result of the merger, the Company reduced the book value of the software to its recoverable amount (value in use) due to the resolution of the Board of Directors
in the fiscal year under review to discontinue the use of the software related to the investment trust system, and recorded an impairment loss of ¥213 million for the
reduction. While our Company’s business assets as a whole are grouped together, idle assets are grouped independently.
4. Income related to transactions with affiliates
Total income from trust transactions:¥3,593 million

Total income from fees and commissions:

395 million

Expenses related to transactions with affiliate
Total expenses related to other businesses and other ordinary transactions: ¥12 million(Statements of Changes in Net Assets)
1. Matters related to class and total number of shares issued and the class and number of treasury stock(Thousand shares)

Total number outstanding at
the beginning of the period

Increase during the period

Decrease during the period

1,020
1,020

1,020
1,020

̶

̶

1,020
1,020

1,020
1,020

Shares issued
Common stock
Total
Treasury stock
Common stock
Total

̶

Balance at the end of theperiod̶

Remarks

2,040
2,040

(Note 1)

̶(Note 2)
̶(Note 1) The increase in the number of shares of common stock among shares issued was due to the issuance of 1,020 thousand new shares when our Company
absorbed JTC Holdings, Ltd.
(Note 2) The increase in the number of shares of common stock among treasury stock was due to the acquisition of stock when our Company absorbed JTC Holdings,
Ltd., while the decrease was due to the delivery of the acquired treasury stock to shareholders.
2. Dividends(1) Dividends paid during the fiscal year
None(2) Of dividends for which the record date belongs to the fiscal year under review, those whose effective date is after the last day of the fiscal year under review.
Type of shares
Common stock

Total dividends¥134 million

Dividends per share¥66

Record date
March 31, 2021

Effective dateJune 30, 2021

The dividend source is other retained earnings.

(Financial Instruments)
1. Matters related to the status of financial instruments(1) Policy on financial instruments
As a bank specializing in asset administration, our Company conducts the operation of banking accounts with limited risks.
(2) Types of contents and risks associated with financial instruments
Our Company’s financial assets, in addition to deposits in the Bank of Japan and other institutions, comprise Japanese Government Bonds, regional government
bonds, loans to the Japanese government, call loans, and receivables under resale agreements. Credit risk and market risk are limited by confining operations
within one year as a general rule, and restraining their size and content to a necessary minimum.
On the other hand, our Company’s financial liabilities are primarily borrowed money from trust accounts and deposits. The balance of such liabilities is stable, and
our Company avoids liquidity risk by limiting its asset administration operations to highly liquid financial instruments.
(3) Risk management relating to financial instruments
1) Credit risk management
Our Company’s principal credit risks arise in the management of idle funds generated by our asset administration business. Our Company has established a“Credit Risk Management Policy,” which calls for restraint in the size and content of such investments to the minimum required for conducting business.
Moreover, the Risk Management Department sets various credit risk position limits based on the “Credit Risk Management Rules,” and monitors the observanceof these limits on a daily basis.
2) Market risk management
Our Company strives for safe and secure management, by establishing a “Market Risk Management Policy” that calls for limiting market risk to the size andcontent required in connection with business and not conducting management for the purpose of capital gains. Moreover, the Risk Management Department
sets various market risk position limits based on the “Market Risk Management Rules,” and monitors the observance of these limits on a daily basis.
Our Company’s market risks arise mainly from the effects of interest rate risk, and the major financial instruments subject to this risk are Japanese
Government Bonds, regional government bonds, loans to the Japanese government, call loans, and receivables under resale agreements. To manage the riskof these financial instruments, CBJ employs the Basis Point Value (BPV) method (which measures the change in the value of these assets for each one basis
point (0.01%) movement in interest ra tes) to conduct quantitative analysis and the management of interest rate risk. As of March 31, 2021, analyses based on
the BPV method indicate that the i nterest rate risk for a one basis point movement in interest rates is ¥12 million. Please note that this movement in asset prices
assumes that risk factors, excluding interest rate risk, remain unchanged, and does not take account of correlations between interest rates and other risk causal
factors.
3) Liquidity risk management
Our Company manages idle cash generated by our asset administration business on a continuing basis and limits management to that without liquidity risk to
the fullest extent possible as provided for in our “Liquidity Management Policy.” Moreover, the Risk Management Department sets various position limits basedon the “Liquidity Risk Management Rules,” and monitors the observance of these limits on a daily basis.
(4) Supplementary explanation of fair value of financial instruments
The fair value of financial instruments is based on the market price of such instruments, but, when market prices are not ava ilable, prices based on reasonableestimates are reported. Since these estimates involve certain assumptions, in cases where assumptions are subject to change, the value of assets may alsochange.

24

2. Fair values of financial instruments
The differences between the carrying amounts on the balance sheets and fair values, as of March 31, 2021, are shown below. Those assets for which fair value is recognized
to be extremely difficult to determine are not included (refer to Note 2).
(¥ million)
Balance sheet amount

Fair value

Difference

16,763,063

16,763,063―

129,500

129,500―

74,77674,776―31,141

31,141―

16,998,481

16,998,481―(1) Deposits

7,410,882

7,410,882―(2) Call money

30,00030,000―9,654,126

9,654,126―

17,095,009

17,095,009

―

60

60

―

60

60

―

(1) Cash and due from banks(2) Call loans(3) Securities
Available-for-sale-securities(4) Loans and bills discounted
Total assets(3) Due to trust accounts
Total liabilities
Derivative transactions (*1)
(1) Those for which hedge accounting is
not applied
Total derivative transactions(*1) Derivative transactions included in other assets and liabilities are presented collectively. Net claims and obligations arising from derivative transactions are presented in net
amounts.
(Note 1) Calculation method of the fair value of financial instruments

Assets(1) Cash and due from banks
Regarding due from banks without maturity, since the fair value closely approximates the book value, the book value is recorded as the fair value.
Regarding due from banks with maturity, as the average life is short (one year or less), and the fair value approximates the book value, the book value is recorded as thefair value.
(2) Call loans
Since the contractual terms of call loans are short (one year or less), and the fair value closely approximates the book value, the book value concerned is recorded as thefair value.
(3) Securities
The fair value of bonds is based on prices in stock exchanges or those quoted by financial institutions. Notes on securities for each holding purpose are included in“(Securities).”(4) Loans and bills discounted
Since loans are short-term (one year or less) loans to the Japanese government, the fair value closely approximates the book value and the book value conserned isrecorded as the fair value.

Liabilities(1) Deposits
Since all deposits are demand deposits, the amount that may be demanded on the date of the closing of accounts (book value) is regarded to be the fair value.
(2) Call money
Since the contractual terms of call money are short (one year or less), and the fair value closely approximates the book value, the book value concerned is recorded as
the fair value.
(3) Due to trust accounts
Since borrowed money from trust account is equivalent to demand deposits, the amount that may be demanded on the date of the closing of accounts (book value) isregarded to be the fair value.

Derivative transactions
Since derivative transactions are currency-related transactions (exchange contract), their fair value is calculated based on the discounted present value.
(Note 2) The balance sheet amounts of financial instruments where it is recognized as being extremely difficult to determine their res pective fair values are as follows, andthey are not included in “Assets, (3) Available-for-sale-securities” in the fair value information of financial instruments.
(¥ million)
Category
Balance sheet amountUnlisted stocks
490
Unlisted foreign
18
securities
Total
509
Because of the absence of market value quotes for these securities, their fair value is difficult to determine, and their fair value is not disclosed.
(Note 3) Redemption schedule of monetary claims and securities with maturity dates after the closing day
Over one year to Over three years to Over five years to Over seven years
One year or lessthree years or less five years or less seven years or less to ten years or lessDue from banks
16,763,062――――
Call loans
129,500――――
Securities
Available-for-sale-securities with
39,70034,934―――maturities
Loans and bills discounted
31,141
―
―
―
―
Total
16,963,403
34,934―――(Note 4) Repayment schedule of deposits and other interest-bearing debt after the date of account settlement
One year or lessOver one year to Over three years to Over five years to Over seven years
three years or less five years or less seven years or less to ten years or less
Deposits
7,410,882――――
Call money
30,000――――Due to trust accounts
9,654,126
―
―
―
―
Total
17,095,009――――(¥ million)
Over ten years
―
―
―
―
―
(¥ million)
Over ten years――――

Demand deposits and borrowed money from trust account equivalent to demand deposits are included in the “one year or less” category. Deposits include balances of current
deposits.

25

Financial Data

(Securities)
Negotiable certificate of deposits in “Due from banks” are included in addition to “Government bonds,” “Local government bonds,” and “Corporate bonds.”
Available-for-sale-securities (as of March 31, 2021)(¥ million)
Type
Balance sheet amount
Bonds
Government bonds
30,009Those with thebalance sheet
Regional government
32,809amount exceeding
bonds
the acquisition cost
Corporate bonds
9,644
Subtotal
72,463
Bonds
Those with a
Regional government
2,213
balance sheet
bonds
amount not
Corporate bonds
99
exceeding the
Others
40,000acquisition cost
Subtotal
42,313
Total
114,776

Acquisition cost

Difference

30,0062

32,75554

9,635
72,397

8
65

2,213

△0

100
40,00042,313
114,711

△0
―
△0
65

(Tax Effect Accounting Items)
The breakdown of factors accounting for the accrual of deferred tax assets and liabilities is as follows.
Deferred tax assets
Provision for retirement benefits
Asset retirement obligations
Provision for bonus payments
Enterprise tax payable
Depreciation denied
Impairment loss denied
OthersTotal deferred tax assets
Deferred tax liabilities
Tangible fixed assets
Prepaid pension expenses
Valuation difference on
available-for-sale securities
Total deferred tax liabilities
Net deferred tax assets

277 million yen
221
185
115
75
65
366
1,306
158
108
4
271
1,034 million yen(Transactions with Related Parties)(1) Parent company and major corporate shareholders
Type
Subsidiary of otheraffiliated company(¥ million)

Name ofcompany

Percentage
ownership

Relationship withrelated party

Type oftransactions

Transaction
amount (Note 2)

Resona Bank,
LimitedOwned Directly
16.6%

Entrusts asset
administration to
CBJ

Re-entrustment
fees, receipt offees (Note 1)

3,980

Accounting item

Balance at end of
period (Note 2)

Accrued income

1,657

Suspense receipt

7,813

Since Resona Bank, Limited became a related party during the fiscal year under review, the transaction amount is the amount during the period that it was a related
party.
Terms of transactions and the decision policies, etc.
(Note 1)Fees for re-entrustment and other fees that are based on cost are decided through negotiations.

(Note 2)The transaction amount does not include consumption tax. The balance at the end of the period includes consumption tax, etc.

(2) Subsidiaries and affiliates, etc.
None(3) Other companies with indirect capital affiliation(¥ million)

Name ofcompany

Percentage
ownership

Relationship withrelated party

Type of transactions

Transaction
amount (Note 3)

Subsidiary of otheraffiliated company

Sumitomo Mitsui
Trust Bank,
Limited̶

Entrusts asset
administration to
CBJ

Re-entrustment
fees, receipt of fees
(Note 1)

15,360Accrued income

6,468

Suspense receipt

26,416

Subsidiary of otheraffiliated company

Mizuho Trust &Banking Co., Ltd.
̶

Entrusts asset
administration to
CBJ

Re-entrustment
fees, receipt of fees
(Note 1)

10,761 Suspense receipt

12,038

Subsidiary of otheraffiliated company

MizuhoInformation &Research
Institute, Inc.
(Note 4)̶Outsourcing ofsystem operationand softwaredevelopment

Outsourcing ofsystem operation
Note 2)
Outsourcing ofsoftwaredevelopment (Note
2)

Type

Accounting item

2,361

̶

3,764

Other liabilities(Note 5)

Balance at end of
period (Note 3)

̶

1,228

As Sumitomo Mitsui Trust Bank, Limited, Mizuho Trust & Banking Co., Ltd. and Mizuho Information & Research Institute, Inc. became related parties during the fiscal
year under review, the amount of transactions is recorded as the amount during the period that they were related parties.
Terms of transactions and the decision policies, etc.
(Note 1)Fees for re-entrustment and other fees that are based on cost are decided through negotiations.

(Note 2)

Prices, etc. for the entrusted system operation and software development are negotiated and determined based on the consideration calculated by
Mizuho Information & Research Institute, Inc.

(Note 3)

The transaction amount does not include consumption tax. The balance at the end of the period includes consumption tax, etc.

(Note 4)

Mizuho Information & Research Institute, Inc. merged with Mizuho Trust Systems Company Limited on January 1, 2021. The amount of transactions
includes that of Mizuho Trust Systems Company Limited.

(Note 5)

They are included in “Accounts payable” under other liabilities.

(4) Directors and other individual shareholders
None

26

(Per share information)
Net assets per share of common stock:¥58,520.81

Net income per share of common stock:¥396.96(Business combination and other relationships)
Based on a merger agreement dated January 31, 2020, our Company, JTC Holdings, Ltd. and Trust & Custody Services Bank, Ltd. merged on July 27, 2020 and changed thetrade name to Custody Bank of Japan, Ltd.
1. Overview of Business Combinations(1) Names of companies engaged in business combination and the contents of business
1) Name of the combining company and the contents of business
Name

CBJ

Lines of business

Trust banking business

2) Names of combined companies and the contents of business
Name

JTC Holdings, Ltd.

Lines of business
NameBank holding company

Trust & Custody Services Bank, Ltd.

Lines of business

Trust banking business(2) Date of business combination
July 27, 2020
(3) Legal form of business combination
An absorption-type merger where our Company is the company surviving the absorption-type merger and JTC Holdings, Ltd. and Trust & Custody Services Bank,
Ltd. are the absorbed companies(4) Name of company after business combination
Custody Bank of Japan, Ltd.
(5) Outline of the transaction
The purpose is to become a leading Japanese bank specializing in asset administration, which handles a wide range of custody services, including trust services
and comprehensive outsourcing services for life insurance companies.
2. Overview of accounting processing
Based on the “Accounting Standard for Business Combination” (ASBJ Statement No. 21, January 16, 2019) and the “Implementation Guidance on Accounting Standard forBusiness Combinations and Accounting Standard for Business Divestitures (ASBJ Guidance No.10, January 16, 2019), it is treated as a transaction under common control.

Confirmation Statement from Management
I have confirmed that the financial statements (balance sheets, statements of income, andstatements of changes in net assets) for the first term, covering the period from April 1, 2020
to March 31, 2021, are presented appropriately and that the internal auditing related to the
preparation of these financial statements functioned effectively.
June 30, 2021
Custody Bank of Japan, Ltd.
Yoshikazu Tanaka, President & CEO

Auditors’ Statement
The Company has been audited by Accounting Auditor KPMG AZSA LLC in accordancewith Paragraph 1, Article 396 of the Companies Act, and received the Audit Report
indicating that all material items pertaining to assets and income have been presented
appropriately in the documents prepared pursuant to the provisions of Paragraph 1, Article
20 of the Banking Act.

27

Financial Data

Fair Value Information of Securities, etc.
Securities
Under this item, negotiable certificates of deposit in “Due from banks” are included inaddition to “Government bonds,” “Local government bonds,” and “Corporate bonds.”○ Available-for-sale securities with fair value(¥ million)

FY2019Former Japan Trustee Services BankType
Those with the balance
sheet amount exceeding
the acquisition cost

Bonds

Those with a balance
sheet amount notexceeding the acquisition
cost

Bonds

Government bonds
Subtotal
Government bonds
Subtotal

Total

Balance sheet amount

Acquisition cost

Difference

―

―

―

―

―

―

30,01530,015△030,01530,015△030,01530,015△0(¥ million)

FY2019Former Trust & Custody Services BankType

Balance sheet amount

Acquisition cost

Difference

Bonds
Those with the balance
sheet amount exceeding
the acquisition cost

Government bonds

1,026

1,026

0

Regional
government bonds

6,260

6,259

1

7,287

7,285

1

Government bonds

1,300

1,300

△0

Regional
government bonds

43,02843,037△8

Corporate bonds

122,756

122,771△ 14

Subtotal

167,085

167,108△ 23

174,372

174,394△ 22

Subtotal
Bonds
Those with a balance
sheet amount notexceeding the acquisition
cost

Total

(¥ million)

FY2020Type

Balance sheet amount

Acquisition cost

Difference

Bonds
Those with the balance
sheet amount exceeding
the acquisition cost

Government bonds

30,00930,006

2

Regional
government bonds

32,80932,75554

Corporate bonds

9,644

9,635

8

Subtotal

72,46372,39765

Government bonds

―

―

―

Regional
government bonds

2,213

2,213

△0
△0

Bonds
Those with a balance
sheet amount notexceeding the acquisition
cost

Corporate bonds
OthersSubtotal

Total
Notes:

28

99

100

40,00040,000―42,31342,313△0

114,776

114,71165

Amounts in the balance sheet are recorded using fair values as of the end of each fiscal year.

○ Available-for-sale securities where it is extremely difficult to determine their fair value(¥ million)

FY2019FY2020

Amount recorded in the balance Amount recorded in the balance
sheet of the former Japan
sheet of the former Trust &Trustee Services Bank
Custody Services Bank

Balance sheet
amountUnlisted stocks

320

442

Unlisted foreign securities

14

2

490
18

Total

334

445

509

○ Valuation difference on available-for-sale securities(¥ million)

FY2019Former Japan Trustee
Services BankFY2020Former Trust & Custody
Services Bank

△2

△ 22

65

Available-for-sale-securities

△2

△ 22

65

Deferred tax assets(△ indicates deferred tax liabilities)

0

6

△ 19

△1

△ 15

45

Valuation difference

Valuation difference on available-for-salesecurities○ Money in trust
None○ Fair Values of Derivatives Transactions
Derivative transactions for which hedge accounting is not applied
Regarding unhedged derivatives transactions, the amount of contract as of the closing datefor each type of transaction item, or the amount of principal equivalent fair value andvaluation gain or loss stipulated in the contract, and the calculation method for thecorresponding fair value shall be as follows. Contract amount, etc. do not per se indicate themarket risk of derivatives transactions.
・Interest-related Transactions
None・Currency-related Transactions
None for FY2019.
(¥ million)

FY2020Category

Type

Contract amount,Contract amount,etc. exceeding one
etc.
year

Valuation of gain
orlossFair value

Exchange contract
Over-thecounter
Total
Notes: 1.
2.

・Order to sell

15,334―00Order to buy

24,193

―

59

59

/

/

60

60

Fair market valuation is conducted on the above transactions and a valuation of gain/loss is recorded in thestatements of income.
Fair value is calculated using the discounted present value.

Transactions related to stocks, bonds, trading and other derivatives transactions
None

29

Financial Data

Other Asset Situation○ Risk-monitored Loans (Status of Loans to Bankrupt Borrowers, Delinquent Loans,
Loans Past Due 3 Months or More, and Restructured Loans)None○ Write-off of Loans
None○ Balance of allowance for loan losses and its changes
None

Asset Classification under the Financial Revitalization Act(¥ million)

FY2019Former Japan Trustee
Services Bank30

FY2020Former Trust & Custody
Services Bank

Bankruptcy or Reorganization Claim or
Other Equivalent Claims

―

―

―

Doubtful Claims

―

―

―

Substandard Claims

―

―

―

Ordinary loans

97,136―31,141

Total

97,136―31,141

Indicators for Banking Business(1) Indicators showing the status of key business○ Gross profits(¥ million)

FY2019Former Japan Trustee Services Bank
Domestic
Business
Division

GlobalBusiness
Division

Former Trust & Custody Services Bank
Total

Domestic
Business
Division

GlobalBusiness
Division

Total

Gross profits

30,309030,30924,756△ 1,750

23,006Gross margin ratio

0.27%

2.83%

0.27%

0.42%

△ 26.71%

0.39%

Fiduciary fees

23,024―23,024

13,134―

13,134

Net interest income△ 2,279△0△ 2,279△ 2,33121△ 2,309

9,564

0

9,564

13,952△ 1,764

12,188

―

―

―

―

△7

△7

Net fees andcommissions
Other net operating
income(¥ million)

FY2020
Domestic
Global BusinessBusiness Division
Division.
Gross profits

Total

45,8852

Gross margin ratio

0.30%

0.02%

0.30%

Fiduciary fees

32,757―32,757

Net interest income△ 4,0810△ 4,081Net fees and commissions

17,2090

17,210

Other net operating income

―

1

1

Notes:

45,887Gross business profit margin = Gross business profit / Average balance of interest-earning assets × 100
Net trading income is not applicable.

○ Net business profits(¥ million)

FY2019Former Japan Trustee
Services BankFY2020Former Trust & Custody
Services Bank

Net business profits

654

397

587

Real net business profits

654

397

587

Net core business profits

654

397

587

Net core business profits (excluding gain orloss on cancellation of investment trusts)

654

397

587

31

Financial Data

○ Average Balance of Interest Income and Capital Finance Accounts(¥ million)

FY2019Former Japan Trustee Services Bank
Former Trust & Custody Services Bank
Domestic
GlobalDomestic
GlobalTotal
Total
Business Division Business Division
Business Division Business Division
Investment
management
account

Investment
management
account

Average
Balance(15)Interest

11,081,541（0）△ 2,247

Average
Balance(6,125)
11,081,541

5,886,062―△ 2,247△ 2,339(15)
11,072,656

6,551
(△ 0)
24

5,886,488

321

5,998,743△ 2,315(6,125)
11,072,656

32

15
(0)
0

32

6,004,548
(△ 0)
△8

2

△6

△ 0.02%―△ 0.02%△ 0.03%0.37%△ 0.03%

0.00%

0.00%

0.00%

△ 0.00%0.72%△ 0.00%△ 0.02%△ 0.00%△ 0.02%△ 0.03%△ 0.35%△ 0.03%

Interest
Yield oninvestment
Yield on financial
arrangements
Interest rate
spread15(¥ million)

FY2020
Domestic
GlobalBusiness Division Business Division
Investment
management
account

Average
Balance(5,876)
15,214,955

Interest△ 4,065
Investment
management
account

Total

Average
Balance（5,876)

Interest

15,335,685(0)
15

Yield oninvestment
Yield on financial
arrangements
Interest rate
spread7,336 15,216,416(0)1△ 4,064

2,980 15,332,789
1

17△ 0.02%0.02%△ 0.02%

0.00%

0.05%

0.00%

△ 0.02%△ 0.02△ 0.02

Notes: 1.

The investment management account is shown after deducting the average balance of non-interest earning duefrom banks (¥187 million for former Japan Trustee Services Bank and ¥31 million for former Japan Trust &Custody Services Bank in FY2019, and ¥387 million in FY2020).

2.

The figure inside the bracket shows the average balance and interest on loans between the Domestic Business
Division and the Global Business Division.

○ Analysis of Increase or Decrease in Interest Income and Expenses(¥ million)

FY2019Former Japan Trustee Services Bank
Former Trust & Custody Services Bank
Domestic
GlobalTotal
Domestic
GlobalBusiness
Business
Total
Business Division Business Division
Division
Division
Net changes in interest
earnedIncrease or decreaseby rate of interest
Net increase or
decrease
Net change in interest paid
Increase or decreaseby rate of interest
Net increase or
decrease

660

―

660

△ 242

6

△ 236

251

―

251

△ 874

0

△ 846

408

―

408

631

6

609

△ 18

△0

△ 18

278

0

278

△4

△0

△4

107

1

106

△ 14

0

△ 14

170

△0

171
(¥ million)

Net changes in interest earned
Increase or decrease by rate of interest
Net increase or decrease
Net change in interest paid
Increase or decrease by rate of interest
Net increase or decrease

Notes:

32

FY2020
Domestic
Global BusinessBusiness Division
Division.
△ 1,818
1
△ 982
―
1
△ 836
1
△ 16
9
1
0
△ 26

Total
△ 1,816
△ 982
△ 834
△ 15
9
△ 24

Parts where the increase/decrease factor overlap between the balance and interest rate are prorated according totheir respective proportion of change.

○ Rate of Return％

FY2019Former Japan Trustee
Services BankFY2020Former Trust & Custody
Services Bank

Ordinary profit to total assets

0.00

0.00

0.00

Ordinary profit to capital

1.19

0.63

1.37

Return on Assets

0.00

0.00

0.00

Return on Equity

0.87

0.12

0.75

Notes: 1. Ordinary profit to total assets (current net) = Ordinary profit (current net) / Average balance for total assets (excluding
customers’ liabilities for acceptances and guarantees) × 100
2. Ordinary profit to capital (current net) = Ordinary profit (current net) / Shareholders’ equity and average balance of
valuation and translation adjustments × 100(2) Indicators for deposits○ Average Balance by Type of Deposit(¥ million)

FY2019Former Japan Trustee Services Bank
Domestic
GlobalBusiness
Business
Total
Division
Division.
Deposits
Liquid deposit

Former Trust & Custody Services Bank
Domestic
GlobalBusiness
Business
Total
Division
Division.

4,834,539―

4,834,539

2,553,879―

2,553,879

4,827,854―

4,827,854

2,487,917―

2,487,917

―

―

―

―

―

―

6,684

―

6,684

65,961―

65,961

―

―

―

―

―

―

Time and savings
deposit
Other deposits
Negotiable certificate
deposit(¥ million)

Deposits
Liquid deposit

Domestic
Business Division

FY2020Global Business
Division.

6,799,176

̶

6,799,176

6,790,742

̶

6,790,742

̶̶Time and savings deposit
Other deposits
Negotiable certificate deposit
Notes: 1.
2.

Total

̶
̶

8,433
̶

̶

8,433
̶

Liquid deposits = Current deposits + Ordinary deposits + Saving deposits + Deposits at noticeTime and savings deposit = Time deposit○ Balance of time deposits by average life
None

33

Financial Data

(3) Indicators for loans, etc.
○ Average balance by loan item(¥ million)

FY2019Former Japan Trustee Services Bank
Domestic
Global BusinessBusiness
Total
Division.
Division

Former Trust & Custody Services Bank
Domestic
Global BusinessBusiness
Total
Division.
Division

―

―

―

―

―

―

103,619―

103,619

191,409―

191,409

Overdraft―――

19,818―19,818Discounted bill

―

―

―

―

―

―

103,619―

103,619

211,228―

211,228

Loan of bill
Loans on deeds

Total(¥ million)

FY2020GlobalBusiness
Division.

Domestic Business
Division̶̶

Loan of bill
Loans on deeds

53,073

Overdraft

16,544̶̶

53,073
̶16,544̶Discounted bill
Total

Total

̶
̶

̶

69,617

69,617○ Balance of loans and bills discounted by average life(¥ million)

FY2019Former Japan Trustee Services
Bank
1 year or less
Floating interest rate
Fixed interest rate
Total
Floating interest rate
Fixed interest rate

FY2020Former Trust & Custody Services
Bank

97,136―31,141―――

97,136―31,141

97,136―31,141―――

97,136―31,141○ Breakdown by collateral for loans and bills discounted(¥ million)

FY2019Former Japan Trustee Services
Bank

FY2020Former Trust & Custody Services
Bank

Securities

―

―

―

Claims―――Commodities

―

―

―

Real estate

―

―

―

―

―

―

Credits

97,136―31,141

Total

97,136―31,141

Guarantees○ Balance of Guarantee of Obligation (Acceptances and Guarantees)
None

34

○ Balance by purpose of loans and bills discounted(¥ million)

FY2019Former Japan Trustee Services
Bank

FY2020Former Trust & Custody
Services Bank

―

―

―

Working capital

97,136―31,141

Total

97,136―31,141

Capital fund○ Balance by industry of loans and bills discounted(¥ million)

FY2019Former Japan Trustee Services
Bank
Composition
Balance
ratio

FY2020Former Trust & Custody
Services Bank
Composition
Balanceratio

BalanceComposition
ratio

Government of Japan

97,136100.00%――31,141100.00%

Total

97,136100.00%――31,141100.00%○ Balance of Loans to SME
None○ Balance of Specific Foreign Claims
None○ Loan-deposit ratio％

FY2019Former Japan Trustee Services Bank
Domestic
GlobalBusiness
Business
Total
Division
Division.

Former Trust & Custody Services Bank
Domestic
GlobalBusiness
Business
Total
Division
Division.

Loan-deposit ratio
Balance at end of period

2.67

―

2.67

0.00

―

0.00

Average during theperiod

2.14

―

2.14

8.27

―

8.27

％

FY2020
Domestic
Global BusinessBusiness Division
Division.

Total

Loan-deposit ratio
Balance at end of period

0.42

―

0.42

Average during the period

1.02

―

1.02

35

Financial Data

(4) Indicators for loans, etc.
○ Average balance of trading securities
Our Company does not own trading securities.

○ Balance of securities by average life(¥ million)

1 year or less

FY2019Former Japan Trustee Services BankOver one year
Over threeThose with noto three years years to five Over five years
prescribedor less
years or lessperiodTotal

30,015――――30,015

Stocks

―

―

―

―

320

320

Other securities

―

―

―

―

14

14

―

―

―

―

14

14

30,015

―

―

―

334

30,349Government bonds

Foreign stocks
Total(¥ million)

FY20191 year or less

Former Trust & Custody Services BankOver one year
Over threeThose with noto three years years to five Over five years
prescribedor less
years or lessperiodTotal

Government bonds

1,300

―

―

―

―

1,300

Regional government
bonds

8,980

7,894

27,180――44,055

119,259

8,712

1,044

―

―

129,016

Stocks

―

―

―

―

442

442

Other securities

―

―

―

―

2

2

Foreign stocks

―

―

―

―

2

2

129,540

16,60628,225―445

174,817

Corporate bonds

Total(¥ million)

1 year or lessOver one year
to three years
or less

Government bonds
Regional government
bonds

30,009――――30,0093,014

32,009―――35,023

Corporate bonds

6,700

3,044

―

―

―

9,744

Stocks

―

―

―

―

490

490

Other securities

―

―

―

―

18

18

―

―

―

―

18

18

39,72335,053――509

75,286

Foreign stocks
Total

36

FY2020Over threeThose with noyears to five Over five years
prescribed
years or lessperiodTotal

○ Average Balance of Securities(¥ million)
FY2019Former Japan Trustee Services Bank
Domestic
Business Division

Global Business
Division.

Former Trust & Custody Services Bank

Total

Domestic
Business Division

Global Business
Division.

1,343

―

Total

7,542

―

7,542

Regional government
bonds

―

―

―

45,168―45,168

Corporate bonds

―

―

―

173,650―

173,650

Stocks

320

―

320

442

―

442

Other securities

―

15

15

―

3

3

―

15

15

―

3

3

7,862

15

7,878

220,6053

220,608

Domestic
Business Division

FY2020Global Business
Division.

Government bonds

28,209―28,209

Regional government bonds

25,281―

25,281

Corporate bonds

Government bonds

Foreign stocks
Total

1,343

(¥ million)
Total

28,181―

28,181

Stocks

417

―

417

Other securities

―

18

18

Foreign stocks

―

18

18

82,09018

82,108

Total○ Security-deposit ratio％
FY2019Former Japan Trustee Services Bank
Domestic
Global BusinessBusiness
Total
Division.
Division

Former Trust & Custody Services Bank
Domestic
Global BusinessBusiness
Division.
Division

Total

Security-deposit ratio
Balance at end of
periodAverage during theperiod

0.83

―

0.83

7.26

―

7.26

0.16

―

0.16

8.63

―

8.63
％

FY2020
Domestic
Business Division

Global Business
Division.

Total

Balance at end of period

1.01

―

1.01

Average during the period

1.20

―

1.20

Security-deposit ratio

Matters concerning Bank Management○ Initiatives to improve the management of SMEs and revitalize local communities
As a bank specializing in asset administration, our Company provides clients withservices dedicated to asset administration. Due to our operational characteristics, wecurrently do not provide loans for business funds to companies, including small andmedium-sized enterprise customers, or for customers who wish to use housing loans. For
this reason, there are no direct activities taken to improve the business of SMEs andrevitalize local communities.

37

Financial Data

Trust Assets and Liabilities(1) Balance table of assets in trust(¥ million)

FY2019Former Japan
Former Trust &Trustee Services
Custody Services
Bank
Bank

FY2020(Assets)
̶

1,556,509
̶

1,556,509

310,640

123,178,561

83,110,413

217,702,529

Loans and bills discounted
Loans on deeds
Securities
Government bonds

310,640

10,888,107

47,748,711

60,249,867

Regional government bonds

604,741

3,610,634

4,137,025

Short-term bonds

798,239442,995

942,302

Corporate bonds

2,494,391

8,523,832

10,760,507

Stocks

79,569,988

9,858,065

93,826,915

Foreign securities

22,196,325

10,665,934

38,138,966

Other securities

6,626,768

2,260,240

9,646,945
̶Securities in investment trusts

58,107,626

Foreign securities in investment trusts

24,575,421

5,836,988

35,004,138

Interests in trusts

44,148,212

21,479,239

72,490,388

Trust securities

20,952,853

2,512,451

25,314,760

Monetary claims

5,640,646

7,203,216

11,442,299

̶Life insurance claims
Housing loan claims

3,583,788

Other monetary claims

2,056,857

465,066

60,364,560

487,859
̶

6,738,149

3,274,793

192

̶Real estate192

̶

7,679,646

Tangible fixed assets

̶̶

Other claims

7,448,110

4,201,826

10,939,011

Call loans

5,800,797

3,760,381

9,308,437

Loans to banking account6,187,490

3,455,048

9,654,126

Cash and due from banks

7,714,683

6,720,451

15,068,998

Due from banks
Total net assets

7,714,683

6,720,451

15,068,998

303,754,597

139,836,527

467,599,890(Liabilities)̶Designated money trusts
Corporate investment fund

4,423,617

Monetary trusts other than money in trust

2,330,106̶

Trust of securities
Monetary claims in trust
Composite trusts
Total liabilities

38

3,681,730

1,310,922

42,711,031

47,400,264

1,023,640

3,501,154

4,046,414

4,575,795
̶

3,583,788

3,274,793

293,417,084

88,373,710

407,536,960

303,754,597

139,836,527

467,599,890

(2) Acceptance of money trusts, etc.
○ Fiscal year-end balance of trust(¥ million)

FY2019

Money trusts
Notes:

Former Japan
Trustee Services
Bank4,423,617

FY2020Former Trust &Custody Services
Bank
46,392,762

48,711,187

Annuity trusts, employees’ property formation benefit trusts, and loan trusts are not applicable.

○ Balance of principal by trust period(¥ million)

FY2019
Money trusts
Less than 1 year
1 year or more to less than 2 years

Former Japan
Trustee Services
Bank
183,200

Former Trust &Custody Services
Bank̶

4,114,403

41,641,853
̶36,540Total

1,233,222
̶Others45,58044,884,164

̶

2 years or more to less than 5 years
5 or more years

FY20204,334,144

̶
1,579,017

367,829

627,927

43,242,906

47,136,689(3) Investment in Money Trusts, etc.
○ Investment balance(¥ million)

FY2019FY2020Former Japan
Trustee ServicesBank̶

Former Trust &Custody Services
Bank
1,556,509

310,640

Working capital

3,881,391

37,155,394

43,148,951

Total

3,881,391

38,711,904

43,459,592

Money trusts
Capital fund39

Financial Data

○ Balance of Loans by Accounting Item(¥ million)

FY2019Former Japan
Trustee Services
Bank̶

Money trusts
Loan of bill
Loans on deeds̶Discounted bill

̶

Total

̶

FY2020Former Trust &Custody Services
Bank
̶
̶

1,556,509

310,640̶̶

1,556,509

310,640○ Balance of Loans by Contract Period(¥ million)

FY2019Former Japan
Trustee Services
Bank̶

Money trusts
1 year or less

Former Trust &Custody Services
Bank
1,556,509

̶

Total

FY2020310,640

1,556,509

310,640○ Breakdown of Loans by Collateral(¥ million)

FY2019Former Japan
Trustee Services
Bank̶

Money trusts
Securities

FY2020Former Trust &Custody Services
Bank
̶
̶

Claims̶̶̶Commodities

̶

̶

̶

Real estate̶̶

Guarantees̶

226,499

111,382

Credits̶

1,330,010

199,258

Total

̶1,556,509

310,640̶○ Balance of Loans by Purpose(¥ million)

FY2019Former Japan
Trustee Services
Bank̶

Money trusts
Capital fund

FY2020Former Trust &Custody Services
Bank
̶
̶

Working capital̶

1,556,509

310,640Total

̶1,556,509

310,640○ Balance of Loans by Industry(¥ million)

FY2020FY2019Former Japan Trustee
Services Bank
Money trusts

40

BalanceComposition
ratio

Former Trust &Custody Services Bank
Composition
ratio
226,499
14.55%

Balance

BalanceComposition
ratio
35.86%

Financial and Insurance̶̶

Government, etc.

̶̶1,330,010

85.45%

199,258

64.14%

Total

̶

̶

1,556,509

100.00%310,640

100.00%111,382

○ Balance of Loans to SME
None○ Securities(¥ million)

FY2019
Money trusts
Government bonds

Former Japan
Trustee Services
Bank374,482

FY2020Former Trust &Custody Services
Bank
30,868,147

33,429,388

Regional government bonds

20,031

1,454,652

1,282,508

Corporate bonds

190,503

4,192,917

4,299,201

1,902,331

240,021

2,218,278

Foreign securities

758,289355,533

1,217,043

Other securities

635,753

44,121

702,530

3,881,391

37,155,394

43,148,951

StocksTotal(4) Status of trusts with principal-guaranteed features○ Fiscal Year-end Balance of Trusts (including trusts that have been re-trusted for the investmentof trust assets)(¥ million)

FY2019
Money trusts(Assets)

Former Japan
Trustee ServicesBank̶

FY2020Former Trust &Custody Services
Bank

Others̶

367,829

627,927

Total net assets

̶

367,829

627,927(Liabilities)̶
627,927

Principal

̶367,829

Others̶00Total liabilities̶

367,829

627,927○ Loans to Bankrupt Borrowers, Delinquent Loans, Loans Past Due 3 Months or More, andRestructured Loans pertaining to Loans
None○ Balance of Disclosed Claims under the Ordinance for Enforcement of the Financial Revitalization
Act pertaining to Loans
None

41

Financial Data

Capital Adequacy Status, etc.
This section is intended to disclose matters that are specified separately by the Commissioner of the Financial Services Agency
regarding the status of capital adequacy, etc. (Financial Services Agency Notification No. 7 of 2014), in accordance with
Paragraph 1 (5) (d), Article 19-2 of the Ordinance for Enforcement of the Banking Act (Ordinance of the Ministry of Finance No. 10
of 1982).
Figures for FY2019 are those of the former Japan Trustee Services Bank.

● Composition of Capital Disclosure
Non-consolidated capital adequacy ratio summary table (Japanese standard)(¥ million)

Core Capital: Instruments and reserves (1)Directly issued qualifying common shares or preferred shares
mandatorily convertible into common shares capital plus related capitalsurplus and retained earnings
Of which, capital and capital surplus
Of which, retained earnings
Of which, treasury stock (-)
Of which, planned distribution of income (-)
Of which, other than above
Subscription rights to acquire common shares or preferred shares
mandatorily convertible into common shares
Reserves included in Core Capital: Instruments and reserves
Of which, general reserve for possible loan losses
Of which, eligible provisions
Eligible non-cumulative perpetual preferred shares subject to transitionalarrangements included in Core Capital
Eligible capital instruments subject to transitional arrangements included
in Core Capital
Capital instruments issued through the measures for strengthening
capital by public institutions included in Core Capital
Amount equivalent to 45% of land revaluation excess subject totransitional arrangements included in Core CapitalCore Capital: Instruments and reserves(a)Core Capital: Regulatory adjustments (2)Total intangible fixed assets (excluding those relating to mortgage
servicing rights)
Of which, goodwill (including those equivalent)
Of which, other than goodwill and mortgage servicing rights
Deferred tax assets (excluding those arising from temporary differences)
Shortfall of eligible provisions to expected losses
Capital increase due to securitization transactions
Gains and losses due to changes in own credit risk on fair valued
liabilities
Prepaid pension costs
Investments in own shares (excluding those reported in the Net Assets)
Reciprocal cross-holdings in capital instruments issued by other financial
institutions for raising capital that are held by the Bank
Investments in the capital of banking, financial and insurance entities thatare outside the scope of regulatory consolidation
Amount exceeding the 10% threshold on specified items
Of which, significant investments in the common stock of otherfinancial institutions
Of which, mortgage servicing rights
Of which, deferred tax assets arising from temporary differences
Amount exceeding the 15% threshold on specified items
Of which, significant investments in the common stock of otherfinancial institutions
Of which, mortgage servicing rights
Of which, deferred tax assets arising from temporary differences
Core Capital: Regulatory adjustments(b)
Capital
Total amount of capital ((C)=(A)–(B))(c)

42

FY2019FY202059,583

119,20251,0008,583

110,073
9,263
̶

̶
̶

134
̶

̶
̶

̶
̶

̶
̶

̶
̶

̶
̶

̶
̶

̶
̶

̶
̶

̶

59,583

119,202

18,64535,173̶̶

18,64535,173
̶

̶
̶

̶
̶

̶
̶

̶

208

245
̶
̶

̶
̶

̶

4,624

̶

8,279
̶

̶
̶

̶

4,624

8,279
̶

̶
̶

̶
̶

̶
̶

̶

23,47843,697

36,10575,504(¥ million)

FY2019Risk-Weighted Assets (3)Credit risk assets
Of which, total of items included in risk-weighted assets subject
to transitional arrangements
Of which, exposure to other financial institutions
Of which, other than above
Amount equivalent to market risk divided by 8%
Amount equivalent to operational risk divided by 8%
Credit risk-weighted assets adjustments
Amount equivalent to operational risk adjustments
Total risk-weighted assets(d)Capital Adequacy Ratio
Capital Adequacy Ratio (C)/(D)49,695

FY2020114,591
̶

̶
̶

̶
̶

̶
̶

̶

56,098105,791̶̶̶̶

105,794

220,38334.12%

34.26%● Qualitative Disclosure
1. Main features of regulatory capital instruments
Capital is raised by common stocks.
2. Assessment of capital adequacy under pillar2
As a method of assessing capital adequacy, our Company implements
management by required capital according to the Capital Adequacy Framework(Pillar 1) and integrated risk management according to internal controls (Pillar 2).
(1) Capital management
As a bank complying with Japanese standards, we strive to maintain andsecure a certain level of required capital in accordance with the Capital
Adequacy Framework.
(2) Integrated risk management
Our Company carries out integrated risk management based on the “CapitalManagement Policy,” “Risk Management Policy,” and “Risk Management
Rules.” Specifically, after setting limits on capital that consider a certain buffer
in times of stress, we confirm that the integrated risk quantity of credit, market
and operational risks are within the limits. In addition, for liquidity risks thatcannot be identified by the integrated risk quantity, stress tests are conducted
and regularly reported to the Executive Management Committee and the Boardof Directors, including the status of compliance with the limitations.
3. Credit risk
(1) Overview of Risk Management Policies and Procedures
1) Definition of credit risk
Credit risk shall refer to “the risk of incurring losses due to a decline in orcomplete loss of asset value (including off-balance assets) as a result of thedeterioration in the financial condition of borrowers.”
2) Characteristics of credit risk
The major credit risk in our Company arises from investment transactionsof surplus funds accompanying asset administration operations, as a resultof default by major borrowers and a large amount of bad debts due todeterioration in credit standing (or provision of allowance).
3) Risk management policy
The “Risk Management Policy” is established, with the credit risk
management policy of keeping the scale and content of credit risks to theminimum necessary to mitigate risks.

43Financial Data

4) Credit risk management structure
The Risk Management Department, which manages credit risk,
supervises compliance with various limits and verifies the rating system.
Monitoring results of credit risk amounts, changes in ratings, compliancewith limits, etc. are regularly reported to the Risk Deliberation Committee.
5) Credit rating, self-assessment, and write-off and reserve, etc.
A. Credit rating
As the basis of credit management, “credit rating” represents the credit
status of obligors and the possibility of default and loss in stages. Our
Company has established an “internal rating” for financial institutions, etc.
as credit ratings with reference to external ratings.
B. Self-assessment
Self-assessment is a preparatory process for write-offs and reserves, etc.
conducted by individually examining the contents of assets owned andcategorizing them according to the risk level of recovery or impairing values.
Our Company has established the “Risk Management Policy” and “Asset
Assessment Management Rules” for proper implementation ofself-assessment. Borrowers are judged by the “category of obligators”
according to their financial condition at each incident that affects disclosureof financial statements and their credit. In addition, a “classification category”
is periodically determined for each asset based on the assessment results
and the protection status, etc., of obligators’ category, reflected in write-offs
and reserves, etc. appropriately, and also used for credit risk management.
C. Write-offs and reserves, etc.
Write-offs and reserves, etc. shall refer to estimating the expected amountof future losses based on the actual results of self-assessment, andconsidering the actual status of loan losses, etc. appropriately and in atimely manner, and making an allowance for or write-off of the amount in theaccount settlement for each half-term. Our Company has established rules,
etc. on write-off and reserves, etc. to ensure proper management ofwrite-offs and reserves, etc.
(2) Portfolios to which the Standardized Approach is applied
Name of qualified rating agency, etc. used for determining risk weight
Our Company uses the following five qualified rating agencies todetermine risk weights, etc.
〇 Japan Credit Rating Agency, Ltd. (〇 Rating and Investment Information, Inc. (R&I)
〇 Moody’s Investors Service, Inc. (Moody’s)〇 S&P Global Ratings (S&P)
〇 FitchRatings
4. Risk management policy and summary of procedures concerning credit risk
mitigation techniques(1) Credit Risk Mitigation Techniques
Credit risk control is achieved not only by reducing the balance of credit,
but also by promoting protection of accounts receivables using collateral,guarantees, etc. Such protection of accounts receivables are collectively
called the “Credit Risk Mitigation Techniques.”
In calculating credit risk assets, our Company reflects the effects ofcredit risk mitigation through eligible collateral and guarantees based on
the Notification.
(2) Major types of collateral
Our Company is currently mitigating credit risks by accepting qualified
financial collateral, etc., which are regularly evaluated.
5. Risk management policy for the risks of counterparties of derivatives
transactions and long-settlement transactions and outline of procedures
None

44

6. Securitization exposure
None
7. Market risk
None
8. Operational risk
(1) Overview of Risk Management Policies and Procedures
Recognizing operational risk as a significant risk in the “RiskManagement Policy” due to our risk profile as a trust bank specializing inasset administration services, we have prescribed a basic policy of
establishing a solid internal control system to prevent such risks andminimizing their impact on business when they materialize.
In order to appropriately manage operational risk in accordance withthe above policy, our Company has established the “Operational Risk
Management Rules,” stipulating that risk management departments shallcarry out risk management activities for each risk subcategory described
below (Processing Risk, Information Security Risk, System Risk, Legaland Compliance Risk, Tangible Asset Risk, Personnel Risk, andReputational Risk), and that the Risk Management Department shallestablish a management system for planning, promoting, andcoordinating all aspects of operational risk management, as a departmentthat comprehensively manages operational risks.
Risk management departments and activities for each risk subcategory
are as follows.
1) Administrative risk
・ The Operations Planning Department is responsible forprocessing risks to plan and promote the management ofprocessing risk.
2) Information security risk
・ Of information security risks, the Operations Planning Department
is responsible for those other than information systems, and the
System Risk Management Department is responsible for
information systems, to plan and promote various risk
management.
3) System risk
・ The System Risk Management Department is responsible forsystem risks to plan and promote the management of systemrisks.
4) Legal & compliance risk
・ The Compliance Department is responsible for legal andcompliance risks to plan and promote legal and compliance risk
management.
5) Tangible asset risk
・ The Human Resources & Corporate Administration Department is
responsible for tangible asset risks to plan and promote various
types of tangible asset risk management.
6) Personnel risk
・ The Human Resources & Corporate Administration Department is
responsible for personnel risks to plan and promote personnel risk
management.
7) Reputational risk
・ The Risk Management Department is responsible for reputation
risks to plan and promote various types of reputation risk
management.

45

Financial Data

The following activities are carried out as management activities
across risk subcategories.
1) Outsourcing management
・ As various operational risks are inherent in the outsourcing of ourCompany business, the Risk Management Department hasestablished the “Outsourcing Management Rules” tocomprehensively adjust the management of outsourcing.
2) Response to severe accidents
・ The “Operational Risk Management Rules” (administered by the
Risk Management Department) set forth standards for the severityof materialized operational risks, and stipulate actions to be taken
according to the severity.
3) Risk Management Deliberation Committee
・ The Risk Management Deliberation Committee (operational risk)has been established to coordinate company-wide operationalrisks, managed by the Risk Management Department.
As comprehensive operational risk management activities,
company-wide CSA (Control Self Assessment) is conducted regularly inorder to identify, assess, and monitor operational risks. Countermeasures
are formulated to risks identified as the result of CSA to control andreduce risks.
(2) Calculation of amount equivalent to operational risk
Calculation method
Our Company calculated operational risk equivalents using the “Basic
Indicator Approach.”
9. Risk management policy and outline of procedures for capital contribution
or equity exposures
Our Company has a credit risk management system in place to manage
default and other risks. Regarding the evaluation of securities for which thedetermination of fair value is extremely difficult, the original purchase prices
are employed based on the moving average method or amortized cost
method.
10. Interest rate risk
(1) Overview of Risk Management Policies and Procedures
1) Definition of interest rate risk in the banking bookInterest rate risk in the banking book (hereinafter, “IRRBB”) is therisk of incurring damage in the bank’s current or future capital andincome due to an adverse fluctuation in the level of interest rates
affecting the bank’s banking book position.
The present value is regarded as the economic value (EVE), andthe loss margin to the current interest rate level is measured as ⊿EVE
for each. The scope of measurement includes positions with interest
rate risk in the banking book.
⊿NII is measured as the decrease in interest income during theperiod from the record date for calculation of interest rate shocks until
the date 12 months have elapsed.
2) Characteristics of IRRBBIRRBB is incurred by a maturity mismatch (gap risk), interest ratemismatch (basis risk), and other factors in the banking book position.
The Ratio of ⊿EVE to Core Capital for our Company was well below
the regulatory level of 20%, maintaining a low level of IRRBB.

46

3) Management structure of IRRBBThe Risk Management Department regularly measures IRRBB andreports to the Risk Deliberation Committee and others.
(2) Overview of Interest Rate Risk Calculation Methods
1) Calculation method of interest rate risk
The assumptions used in calculating IRRBB are as follows.
・ Core deposits are not set, but liquid deposits are set as funds withno maturity
・ Nothing applies to early cancellation of time deposits, early
redemption of personal loans and handling of foreign currencies.
2) Interest rate risk other than ⊿EVE and ⊿NII
The BPV (basis point value) is used to measure and manageinterest rate risks.
● Quantitative Disclosure(1) Capital○ Non-consolidated Required Capital by Portfolio Category(¥100 million)

FY2019FY2020Credit risk
Standardized Approach
For CCP (Central
Counterparty Clearing
House)
Operational risk
Total amount of
non-consolidated capital

12.8

32.1

7.0

13.7

22.4

42.3

42.3

88.1

Operational risk equivalents are calculated using the Basic Indicator Approach.

(2) Credit risk
○ Credit Risk Exposure Status
Note: For off-balance sheet exposures, credit equivalents are shown. Exposures are not included when it is notnecessary to calculate the amount for credit risk assets.
There was no significant difference between the year-end balance of credit risk exposures and the average risk
position during the fiscal year for both the previous fiscal year and fiscal year under review.

Breakdown by region

Domestic
Overseas
Total

Off-balance sheet amountother than loans,
commitments andderivatives
1,067

Off-balance sheet amountother than loans,
commitments andderivatives
Domestic

Others
̶

303
0
303

Securities

̶311

Derivatives

Total

96,894̶̶̶
96,894

98,265
098,265(¥100 million)

FY2020311

Overseas
Total

Securities
̶

1,067

(¥100 million)

FY2019Derivatives

OthersTotal
170,300752

̶169,237

0

̶

50

50

752

̶

169,287

170,351

47

Financial Data

Breakdown by trading partner

For sovereign
For financial
institutions andothersOthersTotal

Off-balance sheet amountother than loans,
commitments andderivatives
971(¥100 million)

FY2019Securities

Derivatives

OthersTotal

̶96,044

97,315

̶

̶

87

87

3
303

̶

763
96,894862
98,265

300
̶

96
1,067
Off-balance sheet amountother than loans,
commitments andderivatives

Securities

For sovereign
For financial
institutions andothersOthers

311

649

Total

311

̶

(¥100 million)̶

FY2020̶

Derivatives

OthersTotal̶

166,829

167,790

87

̶

1,809

1,896

15

̶

649

664

752

̶

169,287

170,351

Breakdown by period

One year or lessOver one year
OthersTotal

Off-balance sheet amountother than loans,
commitments andderivatives
971(¥100 million)

FY2019Securities
̶

96
1,067
Off-balance sheet amountother than loans,
commitments andderivatives

Derivatives

300

̶

̶
3
303

̶

Others
576

1,847
̶

̶

̶

96,31796,894
̶

96,417
98,265(¥100 million)

FY2020
Securities

Total

Derivatives

Others

Total

397

̶

Over one year

̶

349

̶

Others

̶

5

̶

180

185

752

̶

169,287

170,351

One year or less

Total

311

311

169,107

169,816̶

349○

Overdue Exposure Status

None

○

Write-off of Allowance for Loan Losses and Loans

None

○

Exposure to which the Standardized Approach is Applied
Breakdown by risk-weight category (after applying credit risk mitigation effects)

Breakdown by period(¥100 million)

FY2019(Risk weight)

0%
10%
20%
100%
250%
1250%
Total

On-balance
sheet
97,315
0
357
148
40
̶
97,862Off-balance sheet

Total

96

97,411
0
357
148
40
̶
97,958
̶
̶
̶
̶
̶

96

FY2020(Risk weight)

0%
10%
20%
100%
250%
1250%
Total

48

On-balance
sheet
167,790
0
2,341
124
83
̶
170,341(¥100 million)

Off-balance sheet

Total

̶

̶

̶

̶

̶

̶

̶

167,790
0
2,341
124
83
̶
170,341

○ Amounts of Capital Deduction and Exposure Applied 1,250% Risk WeightNone(3) Credit Risk Mitigation Techniques○ Breakdown of Exposures to which Credit Risk Mitigation Techniques are Applied
FY2019Financial asset
collateral(¥100 million)

Creditderivatives

Guarantees

Total

Standardized Approach
For sovereign
For financial institutions andothersFor corporate and others

̶

̶

̶

̶

̶

̶
̶

̶

306

̶
̶
306

Mortgage loan

̶

̶

̶

̶

Securitization

̶

̶

̶

̶

Others

̶

̶

̶
̶

̶

Total

306

̶
306

FY2020Financial asset
collateral(¥100 million)

Guarantees

Credit derivatives

Total

Standardized Approach
For sovereign
For financial institutions andothersFor corporate and others

̶

̶

̶

̶

̶

̶

̶

̶

̶

̶

̶

̶

Mortgage loan

̶

̶

̶

̶

Securitization

̶

̶

̶

Others

̶

10

̶

10

̶

10

̶

10

Total

̶

(4) Counterparty Risk in Derivative and Long-term Settlement Transactions
None(5) Securitization Exposures

None(6) Market Risk
Our Company does not include market risk equivalents in the calculation of its capital
adequacy ratio.

(7) Risk of Equity Exposures○ Balance sheet amount and Market ValueFY2019FY2020

Balance sheet amount

Fair value

Listed equity exposures̶Equity exposures other than above

3

Total

3

(¥100 million)

Balance sheet amount

Fair value

̶

̶

̶

̶

5

̶

̶

5

̶

○ Gains/losses on sale and redemption of equity exposure
FY2019FY2020Gain/loss
on saleGain/loss on
saleSale of equity exposures̶Gain onsale̶Loss onsale̶

(¥100 million)

Gain on sale Loss on sale55̶○ Amount of gain or loss by write-offs and valuation related to equity exposures.
None

49

Financial Data

○ Unrealized gains/losses recognized in the balance sheets and not recognized in thestatements of income
None○ Unrealized gains/losses not recognized in the balance sheets and the statements ofincomeNone(8) Interest Rate Risk
IRRBB1: Interest rate risk(¥ million)

Item No.

⊿EVE

⊿NII

⊿EVE

⊿NII

FY2019FY2020424△1,197

1,282

△ 424

1,197

△1,282△2,015

1

Parallrl up

2

Parallel down

3

Steepener

̶

̶

̶

̶

4

Flattener

̶

̶

̶

̶

5

Short rate up

̶

̶

̶

̶

6

Short rate down

̶

̶

̶

7

Maximum

8Core capital

424

1,197

1,282

FY2019FY202036,10575,504

2,015

̶
2,015

Disclosure of Compensation, etc
This section shall relate to compensation, etc. based on the provisions of Article 19-2, Paragraph
1, Item 6, etc. of the Ordinance for Enforcement of the Banking Act (Ordinance of the Ministry of
Finance No. 10 of 1982), and disclose the case specified separately by the Commissioner of the
Financial Services Agency as a matter that may have a material impact on the status of business
operations or assets of banks, etc. (Financial Services Agency Notification No. 21 of 2012).
1. Matters related to the development of organizational structure forcompensation, etc. of Applicable Officers and Employees of our Company(1) Scope of “Applicable Officers and Employees”
The following shall describe the scope of “Applicable Officers” and“Applicable Employees, etc.” (collectively referred to as “Applicable
Officers and Employees”) set forth in the compensation notification to bedisclosed.
1) Scope of “Applicable Officers”
Applicable officers include our Company directors and corporate
auditors, excluding external Directors and Corporate Auditors.
2) Scope of “Applicable Employees, etc.”
Of officers and employees who are not Applicable Officers, ourCompany shall subject “Persons receiving a high amount ofcompensation, etc.” having a material impact on the business
management or financial condition of our Company and the major
consolidated subsidiaries to disclosure as “Applicable Employees, etc.”
A description of our Company’s consolidated subsidiaries is omitted as
there is no such subsidiary. Information on our Company’s
consolidated subsidiaries is omitted as there are no such companies.
There are no “Applicable Employees, etc.” among officers andemployees other than “Applicable Officers” at our Company.
(A) Scope of “Persons receiving a high amount of compensation, etc.”
Persons receiving a high amount of compensation, etc. shall referto those who receive compensation, etc. exceeding the standard
amount from our Company. Our Company has set the standard
amount at ¥20 million. The standard amount is set based on the
average amount of compensation for Applicable Officers of ourCompany.
50

(B) Scope of “Person having a material impact on the business operations or
financial condition of our Company”
A “Person having a material impact on the business operations or
financial condition of our Company” shall refer to those whose transactions
and management matters regularly conducted have a considerable impact
on the operation of our Company’s business or whose transactions, etc.
could cause loss with a significant impact on the financial condition of ourCompany.
(2) Determination of compensation, etc. for Applicable Officers and Employees
1) Determination of compensation, etc. for Applicable Officers
At our Company, the General Meeting of Shareholders determines thetotal amount of compensation (the maximum amount) for directors andcorporate auditors. The Board of Directors is wholly trusted with theallocation of compensation to individual directors resolved by the General
Meeting of Shareholders. Allocation of compensation to individual
Corporate Auditors is wholly determined by consultation among Corporate
Auditors.
2. Pertinence Evaluation of System Design and Operation of Compensation, etc. forApplicable Officers and Employees of our Company(1) Policies concerning compensation, etc.
1) Policies concerning compensation, etc. for Applicable Officers
At our Company, the General Meeting of Shareholders determines the
maximum total amount of compensation for directors and corporate auditors.
Directors’ compensation is resolved by the Board of Directors, andCorporate Auditors’ compensation is determined by consultation among
Corporate Auditors within the limit of the total amount of compensation
resolved by the General Meeting of Shareholders.
3. Consistency between our Company’s compensation system for Applicable
Officers and Employees and risk management, and linkage between
compensation, etc. and performance
There is a mechanism in place when determining compensation, etc. forApplicable Officers, where the total amount of compensation for all officers is
resolved by the General Meeting of Shareholders. There is a mechanism of taking
budget measures in place when determining compensation, etc. considering ourCompany’s financial condition and other factors.
4. Types, Total Amount and Payment Method of Compensation, etc. for Applicable
Officers and Employees of our Company
Total amount of compensation, etc. for Applicable Officers and Employees of ourCompany (from April 1, 2020 to March 31, 2021)(¥ million)

Category

Applicable
Officers(excluding
external officers)

Headcount11

Total amountof
Retirement
Total amount
Total amount
Basic
Stock
compensation,of fixed
Others of variable Bonuses benefitscompensation
optionetc.
compensationcompensation
129

129

129

̶

̶

̶

̶

̶

5. Other reference matters related to the system on compensation, etc. for the
Applicable Officers and Employees of our Company
There is no particular matter applicable other than those listed in the preceding
paragraphs.
Consolidated Information
As our Company has no subsidiaries, consolidated accounting is not implemented.
51

List of items fordisclosure
Article 19-2, Ordinance for Enforcement of
the Banking Act
1.

Overall Business and Organization○ Management organization _________________________ 3○ List of major shareholders _________________________ 2○ Management ____________________________________ 4○ Name of Accounting Auditors ______________________ 27○ List of offices ____________________________________ 2○ Matters concerning bank agent __________________ None

2. Key Business

7~9

3. Matters concerning Key Business○ Business overview in the latest business year__________ 6○ Indicators showing the status of key business in the last 5
business years
 Ordinary income ______________________________ 19
 Ordinary profit or loss __________________________ 19
 Net income or loss ____________________________ 19
 Capital and total number of shares issued __________ 19
 Net assets ___________________________________ 19
 Total assets__________________________________ 19
 Deposits ____________________________________ 19
 Loans ______________________________________ 19
 Securities ___________________________________ 19
 Non-consolidated capital adequacy ratio ___________ 19
 Dividend payout ratio __________________________ 19
 Number of employees__________________________ 19
 Fiduciary fees ________________________________ 19
 Trust account loans ___________________________ 19
 Trust account securities ________________________ 19
 Trust account electronically recorded transferred rights
securities __________________________________ None
 Total entrusted assets _________________________ 19○ Indicators showing the status of business in the last 2
business years ndicators showing the status of key
business(1) Indicators showing the status of key business Gross profits and net business profits, etc. _________ 31
 Net interest income, net fees and commissions, net
trading income, other net operating income _________ 31
 Average balance, interest, yield and net interest marginof investment management accounts and capitalfinance accounts ______________________________ 32
 Increase or decrease in interest income and expenses 32
 Ordinary profit to total assets and ordinary profit tocapital ______________________________________ 33
 Net return on assets and return on equity __________ 33(2) Indicators for deposits
 Average Balance by Type of Deposit ______________ 33
 Balance of time deposits by average life ___________ 33(3) Indicators for loans, etc.
 Average balance by loan item ___________________ 34
 Balance of loans by average life__________________ 34
 Balance of loans by type of collateral and customers’
liabilities for acceptances and guarantees __________ 34
 Balance of loans by purpose ____________________ 35
 Balance of loans by industry and the proportion in total
amount of loans ______________________________ 35
 Balance of loans to SME and the proportion in total
amount of loans ______________________________ 35

 Balance of specific foreign claims by country, which
account for 5% or more of the total ________________ 35
 Loan-deposit ratio _____________________________ 35(4) Indicators for loans, etc.
 Average balance of trading account securities by type _ 36
 Balance of securities by type and average life _______ 36
 Average balance of securities by type ______________ 37
 Security-deposit ratio ___________________________ 37(5) Indicators for trust business Balance table of assets in trust ___________________ 38
 Acceptance of money trusts, etc. __________________ 39
 Balance by type of trusts with principal-guaranteedfeatures _____________________________________ 41
 Balance of principal of money trusts and loan trusts bytrust period ___________________________________ 39
 Loan by type of money trusts, etc. and investment
balance by security category _____________________ 39
 Balance by loan item related to money trusts ________ 40
 Balance of loans pertaining to money trusts, etc. bycontract period ________________________________ 40
 Balance of loans pertaining to money trusts, etc. bytype of collateral _______________________________ 40
 Balance of loans pertaining to money trusts, etc. bypurpose _____________________________________ 40
 Balance of loans pertaining to money trusts, etc. byindustry and the proportion in total amount of loans ___ 40
 Balance of loans pertaining to money trusts, etc. for
SME and the proportion in total amount of loans _____ 41
 Balance of securities pertaining to money trusts, etc. bytype _________________________________________ 41

4. Matters concerning Business Operation○ Risk management system ______________________ 12~13○ Legal compliance management system ______________ 14○ Initiatives to improve the management of SMEs andrevitalize local communities ________________________ 37○ Name of designated dispute resolution organization ____ 15

5. Matters concerning Status of Assets in Last 2
Business Years○ Balance sheets, statements of income, and statements ofchanges in net assets _________________________ 20~22○ Balance of risk-monitored loans __________________None○ Balance of risk-monitored loans for trusts withprincipal-guaranteed features ____________________None○ Capital adequacy status ______________________ 42～50○ Fair value information on securities, money in trust, andderivatives transactions ________________________ 28~29○ Allowance for loan losses at fiscal year-end and theincrease/decrease during fiscal year _________________ 30○ Amount of write-off of loans ________________________ 30○ Auditors’ Statement ______________________________ 27

6. Matters related to Compensation, etc_________ 50~51
7. Consolidated Information _____________________ 51

The Ordinance for Enforcement of the
Act on Emergency Measures for the
Revitalization of the Financial
Functions○ Asset Assessment Status

30

DISCLOSURE 2021
The document is a disclosure material prepared in accordance with Article 21 of
the Banking Act.
Published

July 2021
Corporate Planning Department, Custody Bank of Japan, Ltd.
8-12, Harumi 1-chome, Chuo-ku, Tokyo, 104-6228
TEL 03-6220-4000
Website https://www.custody.jp/

Financial Data

54